Initially agreed upon in 2019, the fee limits were set at 0.2% for non-EU debit card transactions in physical stores and 0.3% for credit card payments, aiming to resolve an EU antitrust probe and avoid substantial fines. These caps were slated to expire in November 2024, following an investigation initiated by business group EuroCommerce's complaint in 1997.
According to the Commission, Visa and Mastercard have voluntarily committed to maintaining these fee caps beyond 2024. The extended arrangement will apply to inter-regional debit and credit card transactions until November 2029, with offline transaction fees remaining capped at 0.2% for debit cards and 0.3% for credit cards. Online transactions will also be subject to capped fees of 1.15% for debit cards and 1.5% for credit cards.
Visa emphasised that the extended fee caps provide stability in the market regarding inter-regional interchange rates. The company noted that the commitments made with the European Commission in 2019 and this latest undertaking acknowledge the distinct nature of cross-border ecommerce transactions compared to in-store payments.
Visa and Mastercard levy interchange fees, also known as swipe fees, on merchants who accept their debit and credit cards, generating revenue for banks and other card issuers. The European Union's antitrust watchdog, however, cautioned that it would initiate an investigation if it finds evidence suggesting the current caps are no longer appropriate.
The EU antitrust investigation into Visa and Mastercard dates back to concerns raised by EuroCommerce, a major European business lobby, in 1997. The complaint alleged that Visa and Mastercard's interchange fees and other practices stifled competition and unfairly burdened merchants and consumers across Europe.
Over the years, the European Commission, acting as the EU's antitrust watchdog, conducted a thorough investigation into Visa and Mastercard's market dominance and pricing practices. The investigation aimed to determine whether these practices restricted competition and innovation in the payments industry, potentially harming consumers by keeping transaction costs artificially high.
Interchange fees, imposed by card networks such as Visa and Mastercard on merchants for processing debit and credit card transactions, play a crucial role in the economics of payment processing.
For merchants, interchange fees constitute a significant operational cost. High interchange fees have been a point of contention among businesses, particularly smaller retailers and independent merchants, who argue that these fees erode their profit margins and increase the cost of doing business.
The impact on consumers is also notable. While interchange fees are paid by merchants, they can indirectly influence consumer prices. Merchants may pass on some of these costs to consumers through higher retail prices or surcharges on card transactions, potentially affecting purchasing decisions and overall consumer spending behaviour. Moreover, the structure and transparency of interchange fees can impact competition among payment providers and innovation in the payment industry, which in turn may affect the availability and affordability of payment options for consumers.
The European Commission's scrutiny of interchange fees and its imposition of caps on fees for certain transactions are part of broader efforts to ensure fair competition in the payments sector. By regulating interchange fees, authorities aim to strike a balance between encouraging innovation and competition among payment service providers while protecting the interests of merchants and consumers.
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