EU Reaches Agreement to Limit Debit and Credit Card Transaction Fees
The European Parliament has reached an initial deal on maximum processing fees for debit and credit card transactions.
Once implemented, the draft terms could affect the revenue stream for many leading European banks.
“These fees are charged by banks belonging to card schemes such as Visa and MasterCard (so-called four-party schemes, involving an issuing bank, a merchant’s bank, the retailer and the card user) which together control the lion’s share of the market,” the official statement said.
Both cross-border and domestic card-based payments are included in the draft. Cross-border debit card transactions will be limited to 0.2 percent of the transaction value. The ceiling for domestic transactions will be 0.2 percent to the annual weighted average transaction value of all domestic transactions within the card scheme.
Additionally, the parties agreed to a 0.3 percent cap on the transaction value of credit card transactions. Analysts say that the hardest hit markets will be Germany and Poland, where average rates and charges range between 1.6 to 1.8 percent.
EU financial establishments are expected to comply with the new regulations six months after the legislation takes effect. The Economic and Monetary Affairs Committee and EU member states still need to formally endorse the agreed deal. It will then be voted on by the EU Parliament, which is expected to happen in 2015.
The new rules are not applicable to commercial cards used for business expenses. Three-party card schemes involving only one bank such as Diners Club and American Express are also exempted, provided the relevant card is issued and processed under the same scheme.
Margrethe Vestager, EU competition commissioner, said, “This legislation is good for consumers, good for business, and good for Europe. It will lead to lower prices and visibility of costs for consumers.”