Fabian Demicoli

Parliament adopts important Terho report on Payments supporting a strong stance on Interchange Fees

The Plenary of the European Parliament has adopted the Terho report on
the green paper ‘Towards an integrated European market for card, internet and
mobile payments'. The report gives a number of recommendations which are very
supportive of our views related to a fair and transparent payment system.

On interchange fees:

"MIFs should be regulated at the European level, with the aim of ensuring
easier access for new market players to cross-border acquiring"


Regulation "should not result in an increase of MIFs in any Member State but
rather to a decrease and, perhaps, a reduction towards zero at some later
stage."


The European Parliament "calls on the Commission to ensure by regulation that
MIFs no longer distort competition by creating barriers to new market entrants
and innovation"

On cross-border acquiring: Any technical
or legal obstacles to cross-border or central acquiring should be removed.

On surcharging: The report states
that surcharging can be harmful to end-users and that therefore, there should
be one commonly used payment instrument available without surcharge and that
any surcharges used should not exceed the additional direct costs.

The Terho report is what is referred to an own-initiative report, not a
report drafted in reaction to a European Commission Communication, and there
will be a further report on the Commission proposals when they are issued next
year. It is however a very positive sign that the Parliament would support
regulation which takes a strong stance on interchange fees.

Why is MIF such an important issue?

The payments market is on the verge of significant change. New
technologies canoffer low-cost electronic alternatives to cash. The MIF however
presents insurmountable obstacle to realising these potential efficiencies. It
is not so much the differences in fee levels between countries that is
problematic, but rather that the very existence of the MIF prevents market
entry and innovation. It also distorts competition between banks, schemes and
payment means.

The two major card schemes compete with each other by offering the
issuing banks higher MIFs: this simply inflates prices and distorts
competition. The MIF creates unnecessary costs by providing 'free' promotional
services, which consumers often do not want or use. These costs are
nevertheless imposed on merchants, who initially try to absorb them but are
(ultimately) forced to pass them on in all retail prices, which means that even
those paying in cash end up paying for the MIF!

The MIF is not integral to the operation of the payments card system.
This is evidenced by significant differences in MIF levels among European
countries and was found to be the case by the European Court in the MasterCard
appeal decision. The Court also found that the MIF exploits the maximum
willingness of merchants to pay. Banks and schemes have never provided
satisfactory or sufficient justification for the existence of the MIF, or for
its cost level.

Further info:

Full text: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A7-2012-0304+0+DOC+XML+V0//EN

See
also European Parliament News http://www.europarl.europa.eu/news/en/pressroom/content/20121116IPR55705/html/Towards-common-fees-for-card-payments

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