The uncertainty over international card networks’interchange rates has cleared up a bit when Visa agrees to reduceits interchange rates to about 0.2% on average for both domesticand cross-border debit transactions. European regulators have longbeen criticizing major card networks i.e. Visa and MasterCard’s MIF(multi-lateral interchange fee) rates and practices, saying thatthey “restrict competition between banks for accepting consumerpayment cards without benefiting consumers by contributing totechnical and economic progress.”
The European Commission had started an investigation onVisa Europe last year. With the newly reached agreement with Visa,the EC said it’s now closing the debit-related part of theinvestigation. The investigation on the credit card MIFs is stillgoing on.
The agreement has wide-reaching impacts on the wholeEuropean payment market and beyond. MasterCard reached an interimarrangement with European Commission on cross-border interchangefees last year due to a 2007 EC ruling but is still appealing theruling in court. The new debit interchange is also likely to becomea benchmark for any planned pan-European debit networks that EC andECB have been calling for. In addition, the decision might alsoaffects the view of other regulators in other parts of the world(e.g. U.S.) towards debit interchange.