Visa, Mastercard to cut foreign card fees in EU

Mastercard and Visa will cut the fees they charge on purchases made in the EU with foreign-issued debit and credit cards, a concession the payment companies hope will end their long-running antitrust battles with Brussels.

Retailers will be charged an average of 40 per cent less on purchases made in the European Economic Area using Mastercard, Maestro, Visa, Visa Electron and V-PAY credit and debit cards issued in countries outside the EEA.

At issue is the fee paid by a retailer’s bank to the cardholder’s bank — a so-called interchange fee — that the card companies use to cover costs of fraud, security and processing.

According to Monday’s agreement, the fee on in-store purchases will fall to 0.2 per cent of the transaction value for debit cards and 0.3 per cent for credit cards.

Online purchases, where the card is not physically presented, will be charged a maximum of 1.15 per cent of the transaction value for debit cards and 1.50 per cent for credit cards.

The higher fees reflect the greater risks, increased complexity and additional value of the global e-commerce payment service, as well as the wider range of competitors, which include PayPal and Alipay.

Margrethe Vestager, European competition commissioner, said the binding promises would “reduce the costs borne by retailers” and, along with earlier decisions, “lower prices for European retailers to do business, ultimately to the benefit of all consumers”.

The newly agreed rates for foreign-issued card transactions will come into effect on October 19 and apply for five years.

Visa and Mastercard can be fined up to 10 per cent of their global turnover if they fail to meet their commitments.

Visa said it “played a central role negotiating a resolution that achieves the best outcome for all parties”.

Mastercard said it saw “the closure of this antitrust chapter as an important milestone for the company”.

EU officials launched their investigations more than a decade ago, initially focusing on fees charged on European-issued cards.

Investigations into the two companies were separate and while Visa addressed the concerns through a series of settlements, Mastercard chose to fight the charges.

The European Commission ruled in 2007 that Mastercard’s fees on cross-border purchases for European-issued cards broke the bloc’s competition rules and inflated the cost of card acceptance by retailers.

It ordered the company to cut the fees. Mastercard capped fees on those purchases in 2009, at 0.2 per cent of transaction value for debit cards and 0.3 per cent for credit cards. Visa soon followed suit and in 2015 the EU’s Interchange Fee Regulation made those caps legally binding.

The EU’s 2007 decision provided the basis for a £14bn legal claim brought against Mastercard in the UK courts, filed on behalf of more than 46m British consumers — the first mass consumer claim brought under the new regime introduced by the Consumer Rights Act 2015.

In a decision in January, Ms Vestager fined Mastercard €570m for limiting the ability of retailers and banks to shop around between member states to find lower interchange fees.