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Lucrative fees to process card transactions are to be capped under a proposal by the European Union’s executive aiming to draw a line under a battle with payment groups such as Visa Europe and MasterCard.
Under a draft European Commission plan, a ceiling would be introduced for charges on all consumer debit and credit card transactions, scaling back a multi billion euro revenue stream for EU banks.
The measure stops short of a full ban on debit card fees, a more far-reaching intervention envisaged in earlier drafts. Even so, the 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.
In addition, the draft plan requires payment card schemes and the entities that process transactions to be legally separated – a forced split that would remake the business model for the main payment groups.
The Commission proposes a 0.2 per cent ceiling on all consumer debit transactions and 0.3per cent cap on credit card transactions, introduced after a two-year transition period where the ceiling applies only to cross-border fees.
According to Commission estimates, this will cut total EU debit card fees from around €4.8bn to €2.5bn, and credit card fees from €5.7bn to €3.5bn.
The cap is broadly based on the proposed antitrust deals with Visa and MasterCard and aims to give “legal clarity” but it reaches deeper into domestic card markets, where fees can vary dramatically. Typical debit card fees range from 0.1 per cent in Denmark to 1.6 per cent in Poland. Average credit card rates in Germany stand at 1.8 per cent, compared to 0.5 per cent in France.