According to a report by the European Commission, in the last 5 years, card fees have fallen by at least €2 billion a year thanks to the Interchange Fees Regulation.
These regulations were introduced in 2015. They cap transaction fees the merchant has to pay when a customer uses a bank card to cover card handling costs and fraud prevention.
Now, the Commission has looked at the effects of the cap and found merchants have saved money. Before the rules, the fees varied greatly. Setting a fixed ceiling has provided more transparency and a level playing field in different EU countries and regions.
It addition, it removed some market barriers like restrictions based on location such preventing certain brands and payment types being used.
Consumers have also benefited from lower card payment charges and lower prices in general. The average savings, as shown in the report, are between €864 million and €1,930 million for consumers.
Card payments are now the most common non-cash payment method in the EU. In 2017, there were nearly 70 billion transactions, making up 52% of cash free transactions.
In addition, Covid-19 has increased this further, as government have urged consumers to avoid cash to promote social distancing and safety to prevent the spread of the virus.
It’s predicted that a permanent shift towards card and electronic payments could take place in the coming years, especially in cross-border transactions.
These have shot up since the regulations were implemented as, according to the report, “they reflect a higher acceptance of cards by merchants, driven in part by lower interchange fees.”
Furthermore, the Commission believes the Interchange Fees Regulation could help more innovation in the sector and support new startups and different payment systems – right now, the market is dominated by Visa and Mastercard.
Commission vice-president for financial services, Valdis Dombrovskis, that the EU hopes “banks from other countries, innovative European fintechs and other European payment service providers will join the first 16 members, bringing their own expertise and assets to this ground-breaking project, and making it even more innovative and competitive at the global level”.
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