To settle a European Commission antitrust investigation, Visa Europe has agreed to cap interchange rates for certain debit transactions in the region at 0.2%, a step that could help advance the mission of the Single Euro Payments Area.
The card association, which licenses its name from Visa Inc. of San Francisco, was under pressure to make the same concessions on debit interchange that MasterCard Inc. announced about a year ago.
"This is one of those things they've decided to go along with because it's tolerable for them," said Megan Bramlette, managing associate for Auriemma Consulting Group in Westbury, N.Y.
The settlement, announced Monday, applies only to immediate debit transactions — those that remove money from the cardholder's bank account right away. It does not affect interchange rates for deferred debit (transactions that take until the end of the month to remove money from an account), credit or commercial cards. The commission continues to investigate Visa Europe for potential antitrust violations in those areas.
EuroCommerce, a trade group whose members include retailers, criticized the commission for accepting Visa Europe's concession. "At a time when consumers are fighting to keep their heads above water, this lackluster compromise sets a very bad precedent for this tax on payments for consumers," Xavier Durieu, EuroCommerce's secretary general, said in a press release. The group advocates setting a flat fee for merchants rather than a percentage.
MasterCard last year agreed to cut its interchange rates on cross-border debit and credit card transactions in Europe. The company continues to pursue its appeal against a European Commission ruling in December 2007 that its cross-border interchange rates violate antitrust rules. A decision in that case is not expected until later this year.
In a press release, Visa Europe's president and chief executive, Peter Ayliffe, called its settlement "an important step towards the achievement of Single Euro Payments Area and the continued displacement of inefficient cash transactions in Europe. It will provide much-needed legal certainty to the industry and provides a mechanism for a revision to the average 0.2% rate if further data become available on the costs of different means of payment, including cash."
Bramlette agreed that the cap is "in the spirit" of what Sepa is trying to accomplish. Sepa is an initiative the banking industry launched in 2002 to link European Union and other euro-based countries' separate national payment systems into a standardized system. That task is supposed to be complete in December 2012, which gives the European Commission time to ask for more concessions, analysts said.
"The commission retains the right to come back later and ask for more" commitments from the card networks, said Zilvinas Bareisis, a senior analyst at the research firm Celent. At least the networks have shown a willingness to comply, he said.