The European Parliament has voted to introduce a cap on interchange fees on card transactions for retailers.
Interchange fees are paid by retailers via a deduction from the original card transaction.
For example, when a customer buys something from a shop on their debit or credit card, the retailer’s bank will deduct the interchange fee from the payment.
MEPs say that a cap on these fees across the EU will allow retailers to pass on the savings to consumers.
However, the decision has also been criticised because any savings that are made are likely to be minimal, and that the interchange fees are key to the card payments system.
EU rule change ‘threat to credit cards system’
Prior to the vote, the UK Cards Association, believed a cap on card fees within the EU would ‘threaten to shatter’ the system for consumers to buy goods and services.
Melanie Johnson, chair of the UK Cards Association, said that the safety, convenience and flexibility of card payments were being put at risk, as a cap could undermine the funding it received.
“Even if the entire saving were passed on by retailers then consumers would save just 5p on an average debit card transaction of £45,” she said.
‘Consumers will benefit from EU cap on card fees’
The policy is likely to begin in a little over a year from now and will place a cap of 0.3% on the interchange fees for credit card transactions, and 0.2% for debit cards.
It is hoped that these savings for retailers will translate into ‘billions’ of savings across the EU, as the cap will apply to cross-border and domestic transactions.
Interchange card fees cost EU retailers over €10 billion each year, according to European Commission figures.
MEP Pablo Zalba Bidegain told European Parliament news: “Consumers will benefit in two main ways: we will impose a cap on these interchange fees, so they will save hundreds of millions or even billions of euros; and we will introduce more transparency, so they know when paying how much corresponds to these fees.”
Previously, antitrust authorities within the EU, excluding the UK, have investigated Visa and Mastercard’s interchange fees for possibly prohibiting competition and thus creating an environment where price-fixing can occur.
“It’s not up to me to say if these fees are artificially high or not. The truth is that there has not been much competition in this market so far, and we know what happens in these cases,” Mr Bidegain said.
The vote on the interchange cap was held on the same day that the EU voted to scrap roaming charges.