Commission caps charges on card and Internet payments and enforces competition

Joaquín Almunia, Vice-President of the European Commission in charge of Competition (on the right), and Michel Barnier, Member of the EC in charge of Internal Market and Services, gave a press conference on the new rules on Payment Services for the benefit of consumers and retailers. In order to adapt EU payments market to the opportunities of the single market and to support the growth of the EU economy, the European Commission adopted a package including: a new payment Services Directive ("PSD2") and a proposal for regulation on interchange fees for card-based payment transaction. (EC Audiovisual Services, 24/07/2013).

Joaquín Almunia, Vice-President of the European Commission in charge of Competition (on the right), and Michel Barnier, Member of the EC in charge of Internal Market and Services, gave a press conference on the new rules on Payment Services for the benefit of consumers and retailers. In order to adapt EU payments market to the opportunities of the single market and to support the growth of the EU economy, the European Commission adopted a package including: a new payment Services Directive (“PSD2”) and a proposal for regulation on interchange fees for card-based payment transaction. (EC Audiovisual Services, 24/07/2013).

It was high time that the European Commission tried to arrest the over-exploitation of European consumers by a handful of banks and credit card providers. This week Joaquín Almunia, Commission’s Vice President responsible for competition policy, and Michel Barnier, EU Commissioner in charge of internal market and services presented one draft regulation and one directive amendment, targeted to control the excesses on interchange fees for cards and breaches of competition in Internet and mobile payments. According to Almunia, “The regulation will impose caps for interchange fees applied with respect to the widespread cards which merchants in practice cannot refuse, that is to say, the consumer debit and credit cards. The cap levels – 0.2% of the value of the transaction for debit cards and 0.3% for credit cards – are those that were accepted in commitments to the Commission from Visa Europe and MasterCard, and also from the Cartes Bancaires in France. They give merchants a share of the benefits of accepting cards instead of cash”.

The European digital payment market if left unregulated will end up like in the US where a simple payment through a bank debit card may entail commissions of up to 3% for the card holder, not including what the retailer is charged for it. In the US super charges for both consumers and traders are standard for payments over the Internet. In this last case commissions and charges are usually impossible to clarify. Only the giant Internet traders like the e-book trust can negotiate charges with banks and credit cards.

Retail purchases and Internet payment clearing and handling, controlled by a handful of huge banking firms and card providers, has gradually become a true bondage for the entire society. The daily lives of 500 million European consumers depend on the banking and plastic card industries. For quite some time payment clearing is a tightly controlled business with providers acting as a trust. At last this week the Commission decided to react.

Commission reacts

Almunia and Barnier, while presenting the new legal texts on interchange fees for cards, Internet and mobile payments stressed that, “For more than 20 years, the Commission and national competition authorities have been dealing with the widespread existence of high interchange fees. How do such fees work? Whenever someone buys something with a card, the bank of the retailer pays a fee to the bank of the consumer. The retailer’s bank then passes the interchange fee on to the retailer, and the retailer passes on these costs to consumers through higher retail prices. This means these higher prices are borne by all consumers, including those paying with cash”.

In this way the entire society is held hostage by the few banking and card firms which control the retail payment system. This arrangement became even more unbearable after the 2008-2009 credit crisis, when the big banks were termed as ‘systemic’, meaning that without them our modern societies cannot function. Credit card firms are in many ways connected to the banking system and constitute an integral part of it.

In view of all that the Commission decided to act. The new regulations will impose caps and rules on interchange fees for cards, Internet and mobile payments. On top of that the Commission is now also proposing a revision of the Payment Service Directive (PSD2) to counter the barriers the banking industry has created in order to block new players from entering the market of Internet payments.

Internet payments

No need to note that Internet transactions are gaining every day more and more importance for consumers. The Commission says that “this is an area which we have been scrutinising – in particular we looked recently into the standardisation undertaken by the European Payment Council. We were worried that it would de facto have created barriers to non-bank players, so we welcomed the decision to stop this activity”.

Quick profits for banks

Let’s put all that in a frame. The European banking industry  – after triggering the 2008-2009 credit crisis and been rescued by governments and the European Central Bank with subsidies amounting to €4.5 trillion – tries now to recapitalise itself fast, through cashing in extra incomes. Understandably one way of doing that is to exploit its dominant position in clearing consumer payments, including the Internet. Seemingly this tendency must have acquired lately uncontrolled dimensions. That’s why the Commission decided to act. Consumers are usually unaware of the charges they pay on their card and Internet payments. Not all commissions appear on the bank client’s statement. For one thing no consumer is aware of the charges the retailer pays to banks and card issuers.

Given that, the Commission felt obliged to act now, arousing strong reactions by card companies. This is an extra indication that the EU’s executive arm was quite right in proposing those regulations. Almunia concluded that “Breaking up this cosy system between banks and card schemes will allow new providers to enter the market”.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU budget: Stepping up the EU’s role as a security and defence provider

Statement by President von der Leyen on recent developments related to Iran and Iraq

The energy industry is changing. Are governments switched on?

Myanmar military leaders must face genocide charges – UN report

The MH17 tragedy to put a tombstone on Ukrainian civil war

Climate change and health: Raising awareness is the key for greener actions

We have a space debris problem. Here’s how to solve it

The US reject EU proposal for prudential financial controls

The EU has to prove it can remain one piece

Will Merkel ever steer the EU migration Titanic and restore her power in Germany?

The EU Commission openly repudiates the austere economic policies

Drones, disinfectant, distancing – Europe’s beaches open up

Unemployment worries spike around the world as coronavirus remains top global concern

The European Commission cuts roaming charges. But “it’s not enough”…

Post the pandemic: keeping our worlds turning

These rules could save humanity from the threat of rogue AI

Unemployment is down across the world’s largest economies

COVID-19: EU co-finances the delivery of more protective equipment to China

Global leaders and companies pledge to reduce the gender pay gap by 2030

Climate change: new rules agreed to determine which investments are green

The EU’s Response to COVID-19

Dangers of poor quality health care revealed ‘in all countries’: WHO report

Mergers: Commission opens in-depth investigation into joint ventures proposed by Boeing and Embraer

4 things ISPs can do to reduce the impact of cybercrime

Implementation of EU Facility for Refugees in Turkey: EU mobilises €663 million in humanitarian assistance

Palestine refugee crisis ‘expanding’; leaving highest number at risk this century across Gaza

European Commission requests that Italy presents a revised draft budgetary plan for 2019

ECB’s new money bonanza handed out to help the real economy or create new bubbles?

From ‘dead on the inside’ to ‘truly alive’: Survivor of genocide against the Tutsi in Rwanda recounts her story as UN marks 25th anniversary

On Youth Participation: Are we active citizens?

Huge data gaps’ hampering ‘evidence-based’ national migration policies

COP24: A million lives could be saved by 2050 through climate action, UN health agency reveals

EU-U.S. Privacy Shield: Second review shows improvements but a permanent Ombudsperson should be nominated by 28 February 2019

EU Commission indifferent on Court of Auditors’ recommendations

First-ever global conference of national counter-terrorism chiefs will strengthen cooperation, build ‘resilient’ States, says top UN official

COVID-19 tracing apps: MEPs stress the need to preserve citizens’ privacy

Almost there: Equal healthcare for LGBTQI+

Palestine refugees’ relief chief warns Security Council money to fund Gaza operations will run out in mid-June

We must learn and change after Haiti sexual abuse scandal -Oxfam chief

Online radio and news broadcasts: Parliament and Council reach deal

Health is nothing but the main consequence of climate change

Marco Polo’s Dream

Rural Bangladesh has already embraced renewable energy. Here’s what the rest of the world can learn

Europe plans to send satellites into space to monitor CO2 emissions

US now has most coronavirus cases in the world – Today’s coronavirus updates

UN chief lauds Fijians as ‘natural global leaders’ on climate, environment, hails ‘symbiotic relationship’ with land and sea

The 28 EU leaders care more about fiscal orthodoxy than effectively fighting youth unemployment

Lagarde: Keep feeding the banks cut down wages and food subsidies

Recognizing, protecting and empowering youth rights in Europe and the world

Should Europe be afraid of the developing world?

Most fish consumers support a ban on fishing endangered species, poll finds

New rules allow EU consumers to defend their rights collectively

The Great Reset needs great leaders to help the most vulnerable

A bad marriage can be as unhealthy as smoking and drinking

EU job-search aid worth €9.9 million for 1,858 former Air France workers

From Model T to EV: a short history of motor vehicle manufacturing

African elephants under continued threat of poaching, warns UN-backed report

This Dutch company has devised an innovative way to deal with food waste

Quicker freezing and confiscation of criminal assets in the EU

Euro celebrates its 20th birthday

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s