TabTraveller

Yes which is a load of crap. The EU might better serve as a consumer champion by targeting exorbitant interest rates charged by CC companies rather than the (generally sub 1%) charge that the overwhelming majority of transactions incur. I am involved in a couple of SMEs both of which pay less than 1.5% on all cc transactions excluding Amex. These are not big companies. Supermarkets and larger merchants pay significantly less than this. Only the likes of PayPal etc charge 2-3%+ to process a payment but that's because those using them don't have their own merchant account normally.

So what will happen? Merchants have higher standing charges rather than just paying for the transactions they process. Consumers and business may well move to new mobile methods like PayM, apple pay etc which can be funded from a bank account and have virtually no fees in return for the funding of benefits like airmiles. And the least democratic quasi federal system in the world kills yet another industry for the sake of it. Bravo.

J-Class

That would be my view, too. The current system is a regressive tax on relatively poorer people who either pay in cash or via debit cards etc.

Plainly there are new entrants to the payments business - Apple, Square and so on. But credit card merchant agreements generally forbid merchants from offering discounts for other forms of payment. (Airlines are rare exceptions to this rule). Given their enormous scale, it would take a long time for the market to naturally see off the credit card companies.

I continue to think this is a sensible new regulation - albeit contrary to my own narrow self-interest!

chris1979

it's an interesting area with lots of different positions.

it's important to keep in mind that banking is different in the rest of the EU which doesnt have free credit banking like the UK.

The Commission would rather see charges being transparent: at the moment, merchants pay the fees and these are passed onto the consumers. Banks and "cards" 'make the money' and consumers pay indirectly through higher cost of products etc. The Commission would rather that costs are allocated transparently, i.e. if it costs �20pa for a credit card, that should be the cost to the consumer who is choosing to use such a card. their belief is that such clear charges will mean more efficient players will come into the market / thrieve with lower charges / more attractive proposition and thus force all players to raise their game (lower cost, become more attractive).

they also want banking cross boarders (that's what PSD II is all about). the UK is different as non Euro but they say "why shouldnt a german consumer use a spanish credit card if that's the best deal for them" hence important that cross border fees are harmonised. Which is the proposal. IF for cross border transactions capped 2 months after MIF passed with domestic caps introduced up to 2 years later (also allowing likes of denmark to go for lower caps if they'd like to).

Given banking (including cards) isn't free in rest of Europe and some / many already pay for cards, the Commission sees the UK as an 'odd one out' and dosnt buy in the argument that MIF 'subsidises' free banking (again, they don't like such cross subsidise).

Banks are telling HMT and the FCA that someone somewhere needs to pay for 'free banking' especially for the socio-economic less well off.

merchants have been lobbying all those involved in the EU legislative process with the line of "our market is highly competitive and we have a track record of passing 'benefits' / lower costs to consumers". I personally don't buy that and can't see a pint of milk at Tesco being 98p rather than 99p because of MIF - but in fairness to merchants, they might pass it on somewhere.

Banks are arguing that cards cost money: anti fraud systems, provision of credit, Section 75 (consumer protection) in the UK and that the 'merchant indifference test' especially with regards to comparisons to cash are skewed - cash isn't free: it costs to 'produce', transport, insure, etc etc and therefore card transactions are in the interest of merchants.

however, going back to the original point, it will happen. Visa and Mastercard and the Banks arent exactly viewed in the best light / champions for consumers so merchant associations together with the belief outlined above from the Commission will make it happen. and 20 and 30 is pretty set. the cap of 7c might change. and whether AMEX as 3 party or 4 party is included or excluded is also still up for debate.

just to be clear, this is all public information and there are thousands of pages on this from lobbying positions to official records and documents. I just happen to be part of a number of meetings on this at various points.....

chris1979

so, interestingly, AMEX (3 party and 4 party) dont have 'interchange fees'. they negotiate a rate / deal with merchants which merchants can accept or not. there are also often one-off payments when "issuers" change schemes.

some of the historic justification of IF has been e.g. the investment in chip&pin or contactless which costs money and needs to be recouped somewhere.

PSD II brings Third Party Providers under regulation and some of these Payment Initiation Services might replace card usage when consumers buy products (merchants have agreements with such TPPs) and it'll be interesting to see whether any commission payments in place of IF happen.....

Beansprout

I'm in the camp that this isn't really an area the EU needs to mess about with - obviously the headline figure of 0.2% sounds fantastic to me as a business owner who currently pays more than that (less than the 3% rate some mentioned, but more than supermarkets), but doubtless there will be other costs introduced to make up for it which simply adds uncertainty.

But, presuming that the charges are made up via other methods, that would then seem to mean that CC earning rates shouldn't decrease? Or, if they aren't made up, will all my favourite retailers abolish the extra few % on their pricing?

Amex are also not the leaders in the rate they pay in the first instance, with MBNA paying far more per � to legacy cardholders, although the number of those will be far smaller than Amex members obviously. Additionally, it is in BA's interests to issue as many Avios to as many people as they can (or, rather, a 'tempting' amount of Avios to as many people as possible....) and BA are presumably (that word again) well aware of the importance of the Exec Club / Avios partnerships.

As for the carp about all consumers paying for the rich who gather Airmiles - what about the fees that these rich people generate for the card companies....has said person not heard the old story about 10 men in a bar?