Mastercard and Visa agree deal with the EU to slash foreign card fees by 40% after long battle with the European Commission
- Fees are a source of revenue for banks but passed on to the merchant
- The European Commission has had decades-long battle against the costs
- Visa and Mastercard could be fined up to 10% of their global turnover if they fail to meet their commitments
Mastercard and Visa have both agreed to cut their fees on payments made with foreign-issued debit and credit cards in the European Union – the latest twist in an EU antitrust investigation.
The European Commission says that interchange fees, where the merchant’s bank pays a charge to the cardholder’s bank, result in higher prices for consumers.
While these fees are a lucrative source of revenue for banks, they are ultimately passed on to the merchant.
Visa, the world’s largest payments network operator and Mastercard, its closest rival, will now cut such fees by an average of 40 per cent, the European Commission said.
Visa & Mastercard have both agreed to cut their fees for foreign card transactions by 40%
This will be welcome news for the Commission, who have waged a decades-long crackdown on payment and credit card fees.
This culminated in Mastercard being fined €570million in January this year for limiting the ability of retailers and banks to shop around between member states to offer lower fees which therefore restricted competition between banks and raising payment costs for retailers and customers.
Europe’s antitrust chief, Margrethe Vestager, 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.’
This is Money has contacted Visa and Mastercard for comment.
The fees will be reduced for five and a half years and the two firms could be fined up to 10 per cent of their global turnover if they fail to meet their commitments.
The two companies have proposed a 0.2 percent fee on non-EU debit card payments carried out in shops and a 0.3 percent fee on credit card payments, the Commission said late last year.
This would bring their fees in line with those charged for EU cards, which were the subject of a long EU investigation after a 1997 complaint by business lobby EuroCommerce.
The Commission initially released its concerns in 2015, saying it was concerned the fees may increase prices for European retailers accepting payments from cards issued outside the EEA and in turn lead to higher prices for consumer goods and services in the EEA.
The Mail on Sunday has recently reported how holidaymakers are being forced to pay in pounds when abroad, although it is often much cheaper to pay in the local currency.
THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS