European Union Looking at Visa’s Payment Card Fees

The European Union is looking into certain credit card fees associated with Visa. The Union is an antitrust regulator that has been established to look at unfair fees being charged by credit card companies. Currently they are looking at the Visa Europe Ltd. Franchise, which is one of the world’s biggest credit card networks. This is starting three months after a ruling was made on MasterCard Inc. for similar illegal fees.

The European Commission stated on March 26 that they would be looking very closely at the interchange fees being charged. These fees are paid between the banks on each transaction. It seems the ending of a settlement made in 2002 has caused these fees to be charged. Visa Europe is seeking a newer settlement.

Neelie Kroes part of the European Union has long thought the fee is more like a tax to drive up the consumers prices on products. They ordered MasterCard to revise how they charge interchange fees, a decision that was made on December 19th. Visa has broadened the case and the efforts of the European Union. They want to lower the fees that the banks are allowed to charge. The lowered fees will cost billions of Euros in revenue for the issuing banks, but the consumer can feel safe that they are being charged correctly for products and services.

The interchange fee is set over the actual cost of the process according to the European Union. The reduction in the cost is supposed to help bridge this gap and make it a more reasonable number. It the fee is lowered or removed the competition would be freed up. It also means that lower fees for the banks are something that could occur.

Visa Europe has a practice that all stores need to take the Visa card. This has meant in the past that the banks have been able to favour those with the higher fees meaning that the merchants don’t have any choice. With the look into the Visa practices this could change so that there is a fairness for the merchants.

Visa expected the investigation into their company as a result of the MasterCard settlement that was just made. They are willing to talk with the commission about a fair and new settlement. They already agreed to cut interchange fees in 2002 and place a cap on the amount. The commission saw this as a way to protect the consumers. With the market evolving over time and the five year agreement at an end there needs to be a new settlement made. A report in January found that the interchange fees are not all that important to the operation of the credit card payment systems. This means that there really doesn’t need to be a fee as there are some countries that don’t even have them.

The fee is a mechanism to make sure that merchants are using the card systems rather than using cash or checks. So a reduction may shift the balance as well as the costs.

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