The European Commission (the Commission) accepted commitments offered by MasterCard and Visa that would reduce inter-regional multilateral interchange fees by an average of 40% on 29 April 2019, thereby making these commitments legally binding under EU antitrust rules.
A multilateral interchange fee (MIF) is a fee that the bank of a retailer (the “acquiring bank”) pays to the bank of the cardholder (the “issuing bank”) when a consumer uses a debit or credit card. Consequently, the acquiring bank passes this fee to the retailer.
Inter-regional MIFs are applied to payments made in the EEA with cards issued outside the EEA. In the absence of bilateral agreements between banks, the inter-regional MIFs set by MasterCard and Visa apply by default. The Commission was concerned that these inter-regional MIFs may anti-competitively increase prices for European retailers and in turn lead to higher prices for customers.
In order to address these concerns, both MasterCard and Visa offered the Commission to reduce their inter-regional MIFs by on average 40%. The Commission recently decided to accept these commitments (thereby making these legally binding under EU antitrust rules) as with the proposed caps the costs for accepting cards do not exceed the costs of alternative payment methods.
Although this is the first decision of the Commission in relation to inter-regional MIFs, the Commission and EU legislation have capped MIFs for intra-EEA transactions in the last decade.
For example, the Interchange Fee Regulation capped interchange fees for cards issued and used in Europe already to a maximum of 0.2% for debit cards and 0.3% for credit cards. Most recently, the Commission imposed a cartel fine of EUR 570 million on MasterCard for obstructing merchants’ access to cross-border card payment services within the EEA (see our earlier Bankbit).
The European Commission press release can be found here.