The European Commission (EC) has accepted commitments offered by Mastercard and Visa on the proposed reduction of their respective inter-regional interchange fees in the European Economic Area (EEA) to be in compliance with the European Union (EU) antitrust rules.
Image: Mastercard and Visa get EC approval to cut inter-regional MIFs in EEA. Photo: courtesy of Aulo Aasmaa/Wikimedia Commons.
Mastercard and Visa committed to reduce on average nearly 40% in their multilateral interchange fees (MIFs) for payments in EEA with consumer cards issued outside the region.
MIF is defined as the fee paid by the bank of the retailer (the acquiring bank) to the cardholder’s bank whenever a consumer uses a debit or a credit card for purchases in a shop or online. The acquiring bank passes the fee to the retailer who includes it in the final prices to all consumers, even if there is no use of a card in a transaction.
The Commission said that the reduction in the MIFs will cut down the costs for retailers in the EEA to a significant extent, when they accept payments made with cards issued outside the region. This, the regulator said is likely to result in lower prices, thereby benefiting all European consumers.
The Mastercard and Visa networks define the level of MIFs applied by their licensee banks among themselves. With the lack of bilateral agreements between the banks, the MIFs level set by the two companies’ networks applies by default.
Commissioner Margrethe Vestager, in charge of competition policy, said: “The commitments, which are now binding on Visa and Mastercard, will reduce the costs borne by retailers for accepting payments with cards issued outside the EEA.
“This, together with our January 2019 decision on Mastercard’s cross-border card payment services, will lead to lower prices for European retailers to do business, ultimately to the benefit of all consumers.”
Previously, the Commission raised its concerns with the two companies that inter-regional MIFs could anti-competitively raise prices for European retailers accepting payments from cards issued outside the EEA, which could translate into higher prices for consumer goods and services in the region.
In response to the concerns, the companies offered commitments to cut down on the current level of inter-regional interchange fees to or under certain binding caps, within six months.