economics

May 11, 2010

Visa Europe to Cut Debit-Card Fees

Filed under: Uncategorized — ktetaichinh @ 2:04 pm
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BRUSSELS—Visa Europe agreed Monday to lower some of the fees assessed for debit-card transactions in a bid to end a European Union antitrust probe.

Antitrust investigators from the European Commission have been examining for several years the fees embedded in both Visa’s and MasterCard’s systems. MasterCard settled a similar case last year.
[euvisa0426] Bloomberg News

Visa Europe said it would cut tcross-border multilateral interchange fees.

Visa Europe—owned by European member institutions under license from Visa Inc.—said it would cut the so-called cross-border multilateral interchange fee to a maximum of 0.2% on debit-card purchases. The commission, the EU’s executive arm, says that amounts to up to a 60% reduction.

Visa Europe and MasterCard operate “four-party” systems, in which funds for a transaction flow from the purchaser to the purchaser’s bank to the merchant’s bank and finally to the merchant. Between the two banks an “interchange fee” is deducted. Big retailers have long railed against these fees, in part because they have no power to negotiate them.

The EU has said interchange fees can amount to an illegal competitive constraint under rules that forbid companies from fixing prices.

Because of limits on the EU’s jurisdiction, the 0.2% cap will apply only to transactions in which the two banks are in different European Economic Area countries, plus national transactions in nine countries where Visa Europe sets domestic fees: Greece, Hungary, Iceland, Ireland, Italy, Malta, Sweden, Luxembourg and the Netherlands. The European Economic Area comprises the 27 EU nations, Norway, Liechtenstein and Iceland.

The Visa Europe proposal doesn’t include credit cards, and the commission says its investigation into Visa Europe’s credit-card fees continues.

Still, said EU spokeswoman Amelia Torres, “This is good for consumers because it is bringing down the cost of cards.” The EU signaled it would accept the Visa Europe proposal, though it must still be formally approved under the bloc’s procedures.

Visa Europe and MasterCard argue that the fees are necessary to fund the development of their payment systems. (American Express Co. operates a three-party system, in which it is the intermediary between purchaser and merchant and thus negotiates fees with merchants; there is no interchange fee.)

Peter Ayliffe, Visa Europe’s chief executive, said the proposal will “provide much needed legal certainty to the industry.” Still, Mr. Ayliffe said the cap could be reviewed “when further data becomes available.”

The retailers’ Brussels lobby group, EuroCommerce, called the proposal a “weak interim compromise.” It said fees were still too high and credit cards should have been included in the cap.

MasterCard last year agreed to a more-comprehensive deal, capping cross-border credit-card interchange fees at 0.3% and debit-card fees at 0.2%.

Visa Europe is a separate company from Visa Inc., though it has a perpetual license to operate the Visa system in Europe.

Write to Charles Forelle at charles.forelle@wsj.com

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