The European Commission has made commitments offered by Mastercard and Visa legally binding under EU antitrust rules. The companies will significantly reduce (on average by around 40%) their multilateral interchange fees for payments in the EEA with consumer cards issued elsewhere.
Visa ir MasterCard
© Reuters/Scanpix

Commissioner Margrethe Vestager, in charge of competition policy, said: “Mastercard and Visa have committed to significantly reduce the interchange fees applied to payments made in Europe with cards issued elsewhere. 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”

When a consumer uses a debit or a credit card in a shop or online, the bank of the retailer (the “acquiring bank”) pays a fee called “multilateral interchange fee” (“MIF”) to the cardholder's bank (the “issuing bank”). The acquiring bank passes this fee to the retailer who includes it, like any other cost, in the final prices to all consumers, even to those who do not use cards.

Inter-regional interchange fees (also referred to as "inter-regional MIFs") are MIFs applied to payments made in the European Economic Area (EEA) with consumer debit and credit cards issued outside the EEA. This would be the case, for example, when a US tourist uses a Mastercard or Visa card to pay a restaurant bill in Belgium.

The Mastercard and Visa networks set the level of MIFs (including inter-regional MIFs) applied by their licensee banks between them. In the absence of bilateral agreements between the banks, the level of the MIFs set by Mastercard or Visa networks applies by default. Retailers and consumers have no means of influencing the level of MIFs.

Both Mastercard and Visa have now committed to reduce their respective inter-regional MIFs. These commitments, which will cut the inter-regional MIFs by on average 40%, will significantly reduce the costs for retailers in the EEA when they accept payments made with cards issued outside the EEA. This is expected to lead to lower prices to the benefit of all European consumers.

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