LONDON – A new proposal by the European Union’s executive
arm would impose a ceiling for credit and debit card transaction fees, scaling
back billions of dollars for EU banks, the Financial Times reports.
While the measure does not ban the fees, the proposal seen
by the Financial Times is far more aggressive than in earlier drafts. “[T]he assault
on fees will be a setback for the payments industry, which has warned it will
raise banking fees for consumers rather than cut retail prices,” it writes.
The plan would also require payment card schemes and card
processors to be separate entities, a split that would reconfigure the business
model for the major payment groups.
"As the cost of processing is a significant part of the
total cost of card acceptance, it is important for this part of the value chain
to be opened to effective competition," the draft said. "On the basis
of the separation of scheme and infrastructure, card schemes and processing
entities should be independent in terms of legal form, organization and
decision making process."
The plan is a culmination of “years of trench warfare
between EU competition authorities and the payment providers,” the Times said,
which previously resulted in agreements with Visa and MasterCard to limit
cross-border transaction fees.
The commission will propose a 0.2% ceiling on all consumer
debit transactions and a 0.2% cap on credit card transactions, to be introduced
after a two-year transition period during which the ceiling would apply only to
cross-border fees.
Such a plan would reduce EU debit card fees from around
$6.32 billion to $3.29 billion annually, and credit card fees from $7.5 billion
to $4.6 billion. "High [fees] paid by merchants result in higher final
prices for goods and services, which are all paid by consumers," the
proposal said.
Banks and payment groups attack any cap on fees as
heavy-handed. They argue card use would decline, cardholder fees would rise,
and retailers would be unlikely to pass along the savings.