Visa Europe Wards Off EC By Offering To Cap Interchange Fees

In an attempt to abate the European Commission’s competition concerns and dodge fines of up to 10 percent of its revenue, Visa Europe has offered to vastly reduce cross-border interchange fee fees.

Visa Europe has suggested putting a cap on its interchange fees at 0.3 percent of the transaction amount for a four-year duration, reports Bloomberg. The drop in fees would amount to a 40 percent to 60 percent reduction in its current interchange fees. The cap would be applicable to both cross-border and domestic interchange fees.

If Visa Europe followed through with the cap, they would be placed on a leveled playing field with their biggest competitor, MasterCard who was already forced to lower their fees as a result of a previous Commission decision..

“It will put at the same level the fees that are used by MasterCard and by Visa and this will allow cheaper use of cards that are a payment system used in almost half of our total payments in the EU,” Joaquin Almunia, EU antitrust commissioner said in a video statement, reports Bloomberg.

“The two big credit card and debit card companies can’t use their market position to have extra profits,” he finished.

Visa Europe received a formal complaint regarding its interchange fees in 2012. Their services are widely used across the continent, as they have more than 3,700 European member banks.

According to FoxBusiness, Visa Europe’s debit and credit card transactions represent about 41 percent of all card payments in Europe, making it the largest card network in the EU.

MasterCard faced similar complaints and was forced to cap fees by 2009.

The Commission argued that Visa Europe’s multilateral interchange fees should be addressed, and stated that the fees, “harm competition between acquiring banks, inflate the cost of payment card acceptance for merchants and ultimately increase consumer prices.”

Along with capping fees, Visa Europe has also offered to remedy its rules and make reforms that allow merchants to easily find better cross-border deals from competitor banks.

Antitrust officials will perform a market test with industry groups before they make a decision to go through with legally binding the cap.

Ruth Milligan, senior adviser on payments at EuroCommerce, which represents merchants in Europe, supported the cap and told Bloomberg, “Merchants will now be able to benefit from centralizing their acquiring in one place, which will bring benefits to the European economy as a whole.”

Visa Europe’s CEO, Peter Ayliffe, responded in an email statement, “Today’s outcome is the result of constructive dialogue between Visa Europe and the European Commission and is in line with the level of 0.3 percent established in the industry.”

To read the full story at Bloomberg click here or to read the full story at Fox Business click here.