johnspenceruk

EDIT: hehe...is NIGH !

The European Parliament voted to cap credit card merchant fees at 0.3 per cent and debit card fees at 0.2 per cent. The plans will now go to the EU’s Council of Ministers, but according to most observers, it's not "if" but "when" the cap will become law. (an analogous change was the recent capping of EU mobile phone roaming fees).

I cannot believe AMEX will continue issuing Avios (or MR points) with merchant CC's fees capped at 0.3%. I would not be surprised if AMEX leaves EU market altogether. Of course, they could increase annual CC fees, but I can't see how that could work.

csdavidson

I would imagine for MasterCard and Visa as well. My HSBC card converts to BA at the equivalent rate of �1 = 1 Avois...I hope that doesn't go away

johnspenceruk

Well, at the moment merchants pay for our Avios upgrades, 2-4-1 vouchers, and such, not AMEX or BA (of course, I mean here only Avios accumulated through CC spend) . Clearly this model will have to change once the cap becomes law?

sds1493

Presumably there would just be a poorer rate given. Amex pay a fraction of a penny per Avios.
I suspect that annual fees will increase, with even more basic cards carrying a fee, although I can not imagine that this will cause a reduction in costs for the consumer. The merchants will be happy though.

johnspenceruk

I am not convinced this will be economically viable. If my memory serves me well, typical MasterCard/VISA merchant fees currently are at around 3% and AMEX at around 3.5% (but I understand can be much higher for smaller retailers).

So the proposed cap is nearly 1/12th (one twelveth!) of the current rate. Can this really sustain issuing avios even at a reduced rate and with higher annual fees?

TabTraveller

Hmmm yes so if I was AmEx what would I be doing? Ramping up my merchant service monthly charge based on the number of transactions estimated to be processed. X for 1-50 per month 2X for 51-100 etc. and all of a sudden merchant services providers are potentially making more money and yet another EU policy falls flat on its face as consumers will pay the cost. It isn't possible or desirable to price regulate an industry such as this where there is already intense competition and a number of new entrants into the market especially in mobile payments.

T8191

I thought this was about Cabin Crew earning Avios!!

However, an 'interesting' development. As a BA Amex PP earner, the 1.5/� on normal transactions and 3/� on BA ones is a significant factor for me (no, I don't use Tesco). Tinker with that substantially, and I simply move my business elsewhere.

nufnuf77

AMEX is very different in that it is both the issuer and card association, hence it collects more of the interchange fees than the rest.
A lot of the changes to cashback and rewards will depend purely on profit valuations of such schemes and comparison with the competitors.

johnspenceruk

Personally, I agree with you, as well as a few other people, here is just one recent article (yeah, the anti-EU Daily Mail

http://www.dailymail.co.uk/money/car...785m-year.html

Quote

But like other ill-thought through policies, it will almost certainly become law.

shorthauldad

Whenever I've seen figures, businesses are paying a flat rate (in pence) for debit card transactions, not a percentage of the transaction. If that's as widespread as I think it might be, why would debit card usage be affected at all by this change?

J-Class

Much as I appreciate the steady stream of Avios from my credit card spending, I'd be delighted to say goodbye to them if it meant that my average bill for everything went down by 3%. Sadly, I fear this change will be more like the change from the former national currencies of Spain, Italy and so on to the Euro - an opportunity for retailers to increase their margins.

Of course, this change is unusual insofar as it is inflationary if nominal prices stay flat. (You will no longer receive the airmiles/cash back rebate, so your net price has increased even if the nominal price is the same).

FromTheRail

Could be a good time to have a CC from and ex-EU country??

chris1979

MIF (merchant interchange fee) regulation has been in the EU legislative process since the EU commission introduced their proposals last summer.

parliament did adopt a text (with a very late and "odd" inclusion of a 7c cap which reduces the blended rate to below 20 and 30 bps) and as you say, it's going through EU Council.

Lots of noises. Lots of lobbying (Brussels trips anyone ;-) ).

Key thing is that yes, it will happen (some countries against (France don't see the need for regulation; some of the Nordic countries would like even lower caps)) and 20 and 30 is pretty set. The 7c is up for debate (not least because the commission text didn't propose it). However, whether AMEX is included (both as a 3 party scheme but also GSN / 4 party scheme (ie AMEX issued by banks)) is still under discussion. 3 party schemes (AMEX direct issues cards) are likely to be EXCLUDED and banks are arguing that AMEX issued by banks should be excluded on same basis: AMEX market share ~2% and regulation is about increasing transparency of fees to improve and increase competition; plus, merchants have the choice to not accept AMEX (which they don't really have with MasterCard or visa).

The Italian presidency is keen to make progress with the file and bring it to triologue before handing over the presidency to the Latvians who have said that MIF and PSD2 is not a priority for them.

I've sat in front of most Member states perm reps and heard their views on this.... Interesting when I spoke to the commission last summer, someone very senior said that the current system (merchants paying fees and passing those onto customers) means that all consumers pay for the rich who use cards for airmiles......

Interesting area. visa have actually voluntarily (having seen the writing on the wall) signed up to a code that introduces a cap of 20 bps for certain transactions from next year.

Lots of lobbying going on as said and inclusion of AMEX not certain but yes, this will change funding or avios and cash back etc (MasterCard introduced a Premium card a while ago which charges high IF like AMEX which pays for some of the perks offered by banks - the difference being that merchants don't know what IF they are paying with those cards until they see their statements).

orbitmic

That made me laugh a lot!

TATLTale

In a family member's business, they pay approximately 1.18% for Visa or MasterCard and 1.9% for Amex. Rates are considerably higher for people with lower turnovers, and lower average purchase prices. I wouldn't be surprised if some merchants were paying as high as 3 to 4%.

That said, I don't think this is the right move. Prices won't go down as a result - we'll just end up paying in a different place. It'll either be the banks that pay, or the businesses. The companies involved will, somewhat obviously, not just give up on that amount of income.

I also have my doubts that it will help competition any, with what will amount to a fixed price market. If Amex can't charge more and have difficultly convincing merchants/customers to pay in a different way, their entire product will be shot - they'll either have to subsist on 0.3% or withdraw from the market.

Edit: have just seen the much better informed chris1979's post that Amex may be excluded. Hurrah!