Interchange Rates May Limit Spread Of Contactless In France

French banks have expressed interest in using contactless technology, both on cards and on Near Field Communication-enabled mobile phones, to grab a larger share of cash transactions. But a major obstacle to the rollout of contactless payment in France, as in other European countries, is the almost complete lack of contactless readers at the point of sale. Among the measures banks will consider to encourage merchants to accept contactless is lowering interchange rates for low-value transactions, says Roland Entz, managing director of Visa Europe's France office. Visa banks in the United Kingdom lowered interchange for the low-value transactions for which contactless technology was designed in advance of the London launch of contactless payment last fall. MasterCard Worldwide reportedly followed suit. "It's something banks need to think about," Entz tells CardLine Global sister publication Cards&Payments. "The banks certainly need to resolve the economic model [for rolling out contactless payment]." In France, interchange remains relatively low compared with other European counties and does not vary across credit, debit or other card products. Interchange, which acquiring banks pay to issuers on card purchases, largely determines the transaction fees merchants pay. Suggesting lower interchange is a touchy subject in Europe, where the European Commission has ordered MasterCard to slash its interchange rates. Regulators also told Visa Europe it should pay heed to the MasterCard ruling. Entz says from Visa's perspective, interchange is an "indispensable" part of the card-payment system. André-Jacques Selezneff, MasterCard business leader for advanced payments in Europe, declines to say whether lowering interchange is necessary to build the infrastructure of contactless readers in France. He says, however, the opportunity for French merchants to co-brand payment cards-a relatively recent development in France-could encourage them to accept contactless payments. Banque Accord, the card-issuing arm of French hypermarket chain Auchan, is the only bank in France that has announced a rollout of contactless cards. The small rollout, which will feature MasterCard's PayPass application, is scheduled to start this year. Visa is participating in two French contactless card pilots.