The decision has been reached in light of the European Commission’s (EC) proposed interchange fees regulation, which is expected to cap MasterCard’s and Visa’s fees and ensure they are fair and transparent.
The regulation, which is currently being debated in the Council of the European Union, is likely to be implemented in the coming months and will benefit consumers and retailers by dealing with the harm which, it is suspected, is caused by current levels of interchange fees.
The Competition and Markets Authority’s (CMA) investigations remain open and, if the CMA were to consider that the interchange fees regulation will not address the suspected harm as expected, the authority would look again at continuing proactively with the investigations.
Currently Visa typically charges 8p per debit card transaction and 0.77% of the transaction value for consumer credit cards. MasterCard typically charges 7 to 11p per MasterCard and Maestro debit card transaction, 0.8% of transaction value for ‘standard’ consumer credit cards, and 1.05 to 1.5% for ‘premium’ consumer credit cards.
The EC’s interchange fee regulation currently proposes to cap debit card fees at 0.2% of the value of the transaction and credit cards at 0.3%. These caps are expected to come into effect during 2015.
Ahead of that the CMA is pleased to note that MasterCard has decided:
- to reduce the interchange fees applicable to its ‘premium’ cards down to the level of its ‘standard’ credit card fees on or before 1 April 2015, regardless of whether the interchange fees regulation is adopted, and
- once the interchange fees regulation enters into force, to implement graduated reductions of its consumer credit interchange rates ahead of the caps that are laid down in the regulation taking effect.
The CMA, and its predecessor the Office of Fair Trading (OFT), has played a significant role in the ongoing drive to deal with interchange fees. For example, the OFT, on behalf of the UK government, intervened at the General Court and the Court of Justice to support the EC to defend its decision that MasterCard’s European interchange fee arrangements infringed competition law, thus setting an important legal precedent. The OFT also played an important role in making a case for the establishment of the UK Payment Systems Regulator (PSR), which will become fully operational on 1 April 2015 (see notes for more information).
The PSR was incorporated on 1 April 2014 and becomes fully operational on 1 April 2015. The PSR will have powers, under the Financial Services (Banking Reform) Act 2013 (FSBRA) to give directions and impose requirements on participants in regulated payment systems, including operators and payment service providers. It will also have the power, following applications made to it, to vary the fees, charges, terms and conditions provided for in agreements relating to payment systems. The PSR will also be a concurrent competition authority with powers under the Competition Act 1998 and the Enterprise Act 2002. HM Treasury is consulting on the designation of those payment systems to be regulated by the PSR, but this is expected to include the MasterCard and Visa card payment systems. It is also expected that the PSR will be the competent authority for the enforcement of the Interchange Fee Regulation (IFR). The PSR will assess what, if any, actions it might need to take regarding domestic interchange fees using its powers.
With effect from 1 March 2015, Visa’s interchange fees for UK domestic consumer debit card transactions will be revised to 0.2%+1p with a maximum cap of 50p for secure transactions and 0.2%+11p with a maximum cap of £1 for non-secure transactions.
More information on the interchange fees regulation is available from the European Commission website.