Visa and MasterCard reached an agreement this week with the French competition authority to slash card processing fees for merchants. As of November 1, MasterCard will cut its interchange fees, referred to by the competition authority as interbank fees, by 49%, from an average rate of 0.55% per transaction to a maximum of 0.28%, and Visa will cut the same fees by 44%, from an average rate of 0.50% to the same 0.28% maximum.
The agreement applies only to merchants and consumer credit card users in France, but also puts the European Union's third-largest market in lock-step with a proposal put forth by the European Commission this summer that would cap processing fees on all EU credit card transactions at 0.3%.
"For both MasterCard and Visa, the amount of interbank fees is set collectively between each payment system and its respective members. While jointly setting the rate may not necessarily be reprehensible in itself, the amount of such fees must nevertheless by justified by objective factors," said the competition authority in a news release. "Ultimately it will be the consumers who will benefit from this reduction in interbank fees, through the repercussions on retail prices of the savings in bank fees that merchants will be able to obtain from their banks."
While the new rules are specifically geared toward consumer transactions, the European Commission's definition of a consumer does not necessarily exclude certain smaller companies, and the entity's directives are firm in the belief that certain "core provisions" of proposals and regulatory changes, such as those enacted by the French competition authority, should always apply regardless of the status of the user.
In either case, the approach taken by France, and the EU in general, to regulate the way in which credit card processing fees are set by the world's two largest card networks looks remarkably strident when compared to similar efforts in the United States. Merchants continue to fight for a reduction in fees via the U.S. judicial system, most recently in a hearing over the pending final approval of a $7.25-billion antitrust settlement against Visa and MasterCard that many merchants believe doesn't go far enough to reduce their processing costs.
Regardless of the agreement's final approval, in the hearing, held in the U.S. District Court in Brooklyn, presiding Judge John Gleeson wondered aloud if the fight over interchange fees in the U.S. would ever be solved without comprehensive federal legislation. While a proposal to firmly cap interchange fees was ultimately scrubbed from the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, similarly sweeping policy changes have been easier to come by in France and the EU.
- Jacob Barron, CICP, NACM staff writer