The European Union’s (EU’s) battle against U.S. card company interchange fees reached new levels earlier this year when the European Commission (EC) issued a $648.3 million fine against Mastercard for its swipe fees, which regulators said drove up prices for retailers and consumers, and hampered competition.
It marked the latest chapter in a long-standing saga, as the European Commission and U.K. Payment Systems Regulator (PSR) continue their probes into competition of the card-acquiring space, with Mastercard and Visa offering late last year to cut swipe fees on tourist cards to help end the EC’s investigation.
Meanwhile, the EC has extended the deadline to release its review of the effectiveness of the Interchange Fee Regulation (IFR), which came into effect in 2015.
Swipe fee debates are not new, with the U.S. Supreme Court ruling in favor of the card networks during a case in 2017, and with Australia in the midst of pondering either swipe fee limits or an outright ban. However, missing from much of this regulatory debate is the issue of interchange fees on commercial cards. Now, European retail groups want that to change.
Reports in PaymentsCompliance noted dissatisfaction among retail communities in the U.K. and Europe with regards to how regulators are reviewing current interchange fee legislation.
“The regulation, as it stands, is completely inadequate at addressing the complexities of the card payment system,” said British Retail Consortium Head of Payments Policy Andrew Cregan during the Merchant Payments Ecosystem Conference held last week in Germany. “What we’re looking for in the review of the IFR, and one of the things we would have been looking for in the PSR’s market review, was a simplification of card regulation [so as] to deal with all the carve-outs and complexities that are involved in it.”
Part of that simplification should include the addition of commercial cards under swipe fee caps, he added.
“We need to have regulation that spans the whole gamut of card payments, … the premise on which a merchant accepts a card,” Cregan continued. “A merchant doesn’t take your card off you and ask if that’s a commercial card, ask you where your card was issued. We need to have legislation that meets the needs of merchants in terms of the way they actually handle card payments.”
The Commercial Card Debate
Commercial card penetration in Europe remains low compared to U.S. levels, reports noted, though card issuers are adamant that commercial cards remain out of the scope of swipe fee regulations. The issue at hand is the IFR’s focus on protecting individual cardholders, whereas corporations are the “consumer” in the case of the commercial card.
The EC has already made adjustments to the 2015 interchange fee cap regulations, most notably in the decision last year to include non-European Union cards under the caps. That means non-EU cards used at European stores will see the same interchange fees imposed on the retailers as Europe-issued cards.
However, the absence of commercial cards in the regulation has irked some retailers, with interchange fees often cited as one of the biggest barriers to adoption, as B2B sellers are reluctant to accept swipe fees. Some solution providers have attempted to address that issue. Last year, for example, Boost Payment Solutions introduced Dynamic Boost, a payments platform that offers dynamic interchange pricing on commercial card transactions.
“Right now, a supplier has no idea how to budget what their cost of card acceptance is,” explained Boost Founder and CEO Dean M. Leavitt in an interview with Karen Webster in October.
Other solution providers are looking to increase awareness among B2B sellers that interchange rates in the U.S. can be lowered by achieving Level Two and Level Three card-processing data.
In Europe, though, interchange fees remain uncapped for the commercial card space. Industry experts have said that imposing such caps on corporate card products will drive up costs and make commercial card adoption too expensive for some firms, particularly small businesses.
In Australia, meanwhile, regulators are reportedly considering an all-out ban against interchange fees on electronic card payments — a ban that would include commercial cards, reports said last year.