The European Commission revealed that it has accepted the commitments by both Visa and Mastercard to reduce inter-regional interchange currency fees, in a legally binding pledge under the antitrust rules of the European Union.
The firms will significantly reduce their multilateral interchange fees (MIF), by approximately 40 percent on average, for payments made in Europe with consumer cards that were issued elsewhere.
In a statement, the official in charge of competition policy, commissioner Margrethe Vestager, stated: “Mastercard and Visa have committed to significantly reduce the interchange fees applied to payments made in Europe with cards issued elsewhere.”
She added: “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 their credit or debit card in a shop or online, the bank of the retailer pays a fee that is called “multilateral interchange fee” to the bank of the cardholder. Naturally, the bank of the retailer passes on the fee to the retailer and they then pass on that expense to the end consumer.
For example, it does not matter if it was a Brit or an American going to a restaurant in Paris, France, they would incur the said fee costs. Also, because of the regular number of fees, the retailers would still pass the overall costs onto their goods and services, implying that even those who do not use cards will see increased prices.
It was confirmed by the European Commission that the reduction for the MIF “will significantly reduce the costs for retailers in the European Economic Area (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.”