FINANCIAL SERVICES : COMMISSION'S PAYMENT CARD INTERCHANGE FEE PROPOSAL UNDER FIRE.

The European Commission's proposal for a regulation on multilateral interchange fees (MIFs) was roundly criticised at a conference on card payment regulations, held in Brussels on 22 January. The size of the proposed fixed caps on MIFs is the prime subject of debate.

The Commission published a legislative proposal, in July 2013, with the intention of regulating MIFs for card-based payment transactions, but this proposal does not seem to be finding favour in any corner, with card issuers and consumer groups alike objecting to the proposed regulatory framework. The proposal foresses an interchange fee fixed cap of 0.2% for debit cards and 0.3% for credit cards. The current average credit card interchange rate in Europe is 0.9% (see Europolitics 4775).

MasterCard has led the attack on the Commission's proposals, poking numerous holes in the regulation. The company states that the proposed caps are "not based on any public data or methodology, despite repeated formal and informal requests for such disclosure". It also laments the lack of a "level playing field," arguing that the 'three party schemes' have been left outside the scope of the draft proposal. A third-party payment service (such as PayPal) eliminates the need to open a merchant account, and can be easier and cheaper to manage.

The Groupement des Cartes Bancaires (CB Bank Card Group) is France's national interbank network. It published, in December 2013, a position paper stating that the Commission's proposals will reinforce the current MasterCard-Visa duopoly, increase the costs of use and acceptance of cards in Europe, and negatively impact the sovereignty and rights of EU citizens. The CB Group's reason for fearing a possible duopoly is that in its view the Commission's proposed definitions of debit cards and credit cards do not reflect the existing differences between the payment card schemes. Instead, they merely mirror the definitions used by two systems only: MasterCard and Visa. Essentially, the group says that "an approach that would turn the internal rules of two market players into European law would...