Interchange fees are not only a hot topic here in the United States. Recently, the European Commission agreed to Visa’s proposal of capping its cross-border multilateral interchange fee (MIF) on consumer debit cards.
Visa capped fees at a maximum weighted average of 0.2 percent. As the single euro payments area (SEPA) initiative progresses, EuroCommerce is among the organization worried about the termination of national debit card plans.
EuroCommerce, founded in 1993, represents the European retail, wholesale and international trade sectors in 31 countries. Cécile Grégoire, Senior Adviser on Payment Systems at EuroCommerce, spoke with PYMNTS.com to provide a retail organization’s perspective on SEPA, the Visa settlement and future of interchange fees on the continent.
PYMNTS.com: What is the mission of EuroCommerce?
CÉCILE GRÉGOIRE: EuroCommerce’s mission is to:
– promote the visibility and defend the interests of commerce in the European Institutions, ensuring that they understand and take into account the concerns and realities of the sector throughout the decision-making process;
– raise awareness among EU decision makers of the importance of commerce in the European economy;
– improve the quality of legislation so as to reduce costs and uncertainties for businesses;
– keep its members informed of EU developments impacting on their daily activities.
PYMNTS.com: What is EuroCommerce’s current stance on interchange fees in Europe?
GRÉGOIRE: Interchange fees on card payments are unfair, because they cover services from which merchants do not benefit. Merchants cannot negotiate them and they are hidden to customers. There is a perverse effect of interchange fees: The higher the level of competition between banks, the higher the fees. Indeed, a large part of interchange fees is used to finance gifts and services given to cardholders: The more banks on the market, the more gifts the customer will receive when he pays with a card… and the higher the fee for the merchant.
Merchants should, of course, pay for services they receive, but the fees should be transparent, negotiable and set in a competitive environment. On direct debit, we fully agree with the European Commission that there is no justification for interchange fees. Banks had a three-year period to make the necessary investments to adapt to SEPA.
PYMNTS.com: What is EuroCommerce’s stance on SEPA? How could SEPA’s governance, in your organization’s view, could be improved?
GRÉGOIRE: SEPA is an excellent initiative that should bring to end users increased choice of payment means and better prices. Opening the market to competition is, of course, a prerequisite, but this competition has to properly function, i.e. lead to lower price. This is not the case at the moment in the card market, where competition between Visa and MasterCard, or at bank level, just means ever increasing prices.
SEPA governance has improved a lot. The creation of the EU SEPA Council and the Cards Stakeholders Group have increased the involvement of end users in the SEPA process. However, this is not sufficient, as users do not have access to EPC working groups and plenary sessions. The EU SEPA Council has been set up to steer SEPA at the policy level. However, there is still a lack, in our view, of a representative decision-making process, particularly on technical issues such as standards. Consideration must be given to establishing an independent, long-term governance model for SEPA.
PYMNTS.com: What types of payments innovations are needed to truly make SEPA a success?
GRÉGOIRE: Innovations will arise when the market is ready. The problem at the moment is not the lack of innovations, but the legal and technical barriers that block innovation.
PYMNTS.com: How did the organization feel about the recent Token Visa settlement? What outcome would EuroCommerce liked to have seen?
GRÉGOIRE: EuroCommerce is dismayed at the marginal progress being made to tackle the urgent issue of interchange fees. The decision today from the European Commission to accept Visa’s token commitments will do little to remove the burden of interchange fees from Europe’s retailers and consumers. Unlike MasterCard, Visa has made no offer to reduce its MIFs on credit cards.
As the single euro payments area moves closer, the threat of a Europe-wide duopoly on the cards payment market looms ever larger. SEPA will put an end to cheap, efficient national debit card schemes, handing the market over to the well-established international brands. The profits for banks, currently assured by exorbitant interchange fees, mean that no issuing bank will do business with a new scheme operating on a lower fee model. Our full reaction is on our website.
PYMNTS.com: What steps are needed for retailers to be able to benefit from single market savings by operating cross-border acquiring?
GRÉGOIRE: The main obstacle is that Visa and MasterCard prevent this possibility in their operating rules. The first necessary step would be to force them to remove these unfair rules. We have a paper on this topic.
PYMNTS.com: What other payments issues in Europe is your organization currently looking to address?
GRÉGOIRE: We are dealing with all aspects of the payment systems market which influence the retailers: payment cards, credit transfers, direct debit, SEPA, cash, fraud…
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