The European Commission has moved one step closer to cutting interchange fees for credit and debit card transactions under its jurisdiction, according to the Financial Times. Although discouraging for the payments industry, the commission was previously considering banning all debit card interchange fees.
The Commission’s latest plan would place a 0.2 percent cap on all debit and credit card transactions after a two year transition period. However, during the transition period, the aforementioned cap would immediately apply to all cross-border transactions in Europe. While MasterCard and Visa have already cut their rates on both debit and credit card transactions as part of separate deals with the European competition regulator, the new cap will impact their respective bottom line significantly.
The Financial Times reports the commission estimates the proposed cap will cut debit card fees by almost half, from €4.8 billion (US$6.3 billion) today to €2.5 billion once the cap is firmly in place. Credit card fees will fall similarly from €5.7 billion today to €3.5 billion.
Though the interchange cap has been under consideration for a significant amount of time, this leak comes at a slightly awkward time as MasterCard presented its case to preserve interchange fees at the European Court of Justice earlier this month. While the cap is only a proposal at this time, it is reflects a broader international trend to limit the fees that Visa and MasterCard can collect and does not bode well for the card networks.
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