Banks face caps on the card fees they can collect on Visa Europe Ltd. and MasterCard Inc. transactions as the European Union seeks to slash charges imposed on retailers by 6 billion euros ($8 billion) a year.
Michel Barnier, the EUs financial-services chief, called today for levies to be capped at 0.2 percent for debit card payments and 0.3 percent for credit cards. The limits target card systems where banks charge each other interchange fees, or swipe fees, for handling payments. American Express Co., the biggest credit-card issuer by purchases, would escape the full force of the rule because its main business uses a different fee system.
Todays plans will remove an important barrier between national payment markets and finally put an end to the unjustified high level of these fees, Barnier said in a joint statement with Joaquin Almunia, the EU antitrust chief. The caps would initially apply to cross-border transactions, and then be expanded to cover domestic payments in the bloc after 22 months.
EU antitrust regulators have targeted swipe fees on credit- and debit-cards for about a decade, warning that the way the charges are collectively agreed on is anti-competitive. Authorities this year started a probe into Purchase, N.Y.-based MasterCards charges on foreign card payments such as when tourists go shopping in the bloc.
The company is appealing the outcome of a separate probe into rates on cross-border credit-card payments at the EUs highest court. The blocs regulators have also targeted Visa Europe, which has offered concessions to end an antitrust investigation. EU regulators concluded a market test of the measures this month.
Complementing the enforcement of antitrust rules, the regulation capping interchange fees will prevent excessive levels of these fees across the board, Almunia said. New players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices, he said.
The EU plans draw a distinction between so-called four- party systems - such as those run by Visa and MasterCard, where payments are made between retailers and consumers banks - and three-party systems run by American Express and PayPal Inc., where the payment card provider, rather than banks, stands in the middle of a transaction.
While three-party systems apply charges, these arent the same as interchange fees, which are passed between banks.
American Express would only be affected when its brand is licensed for use by other companies in ways that involve interchange fees. This applies to about 9 percent of American Express business, according to European Commission data.
Aside from fee caps, the EU plans would also require card companies to put firewalls between business units that administer card networks and those providing optional payment processing services to banks.
The EU also today proposed a broader overhaul of its rules on payments in a bid to boost competition and better protect consumers.
The plans include capping the losses faced by a victim of card fraud at 50 euros, compared with 150 euros at present, and making it easier for non-bank companies that offer payment services to operate across the 28-nation EU.