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Visa Europe To Reduce Multilateral Interchange Fees, Moves Towards SEPA

Visa Europe has welcomed the European Commission’s (EC) agreement that, following public consultation, it will accept proposed commitments from Visa Europe on its multilateral interchange fees (MIFs) for intra-regional immediate debit transactions in the EEA. Visa Europe also supported the European Commission’s proposal to end proceedings on its immediate debit interchange fees.

Under the proposed commitments, Visa Europe will cap its weighted average intra-regional multilateral interchange fees for immediate debit transactions at 20 basis points (0.2%) for four years. The same cap will apply to domestic immediate debit rates that defaulted to the intra-regional MIF rate before March 10, 2009 and continue to do so, and to domestic immediate debit rates set directly by Visa Europe. Many of these countries have their own arrangements for setting domestic interchange or have few immediate debit card transactions, therefore the overall impact is limited.

Visa Europe has said that as the data on which the commission has based its current calculations are incomplete, and do not yet include all relevant cost categories, the commitments set out a clear mechanism for revising the 0.2% cap when further data becomes available.

The European Commission has already launched a pan-European study on the costs of different payment methods. Visa Europe has been sharing its know-how in the development of such studies with the commission and has provided the commission with a list of points it considers should be taken into account in the study. The proposed commitments note that Visa Europe will be further consulted on the commission’s methodology going forward.

The proposed commitments highlight the importance of establishing a common methodology which can be used by competition authorities across Single Euro Payments Area (SEPA) to calculate MIFs for immediate debit transactions in their local jurisdictions, and will establish a level playing field for all four party debit card systems operating in Europe.

The proposed commitments relate to MIFs for immediate debit transactions only and do not affect credit, deferred debit or commercial MIFs. The application of the so-called ‘merchant indifference’ test to credit and deferred debit transactions is considerably more complicated in circumstances where cash is not a realistic alternative to credit.

Moreover, Visa Europe and the European Commission will continue their ongoing discussions on these issues in the coming months with a view to reaching an agreed outcome. Pending the outcome of these discussions, Visa Europe’s MIFs for intra-regional credit and deferred debit transactions will remain unchanged.

Peter Ayliffe, president and CEO of Visa Europe, said: “The proposed commitments on immediate debit interchange fees are an important step towards the achievement of Single Euro Payment Area (SEPA) and the continued displacement of inefficient cash transactions in Europe. It will provide much needed legal certainty to the industry and provides a mechanism for a revision to the average 0.2% rate if further data becomes available on the costs of different means of payment, including cash.

“I am satisfied that these commitments will lead to the establishment of a suitable cost of cash methodology which can be applied both on a cross-border and a domestic basis. In proposing these commitments Visa Europe has acted in the best interests of consumers, retailers and our member banks.”