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MasterCard Worldwide has agreed to slash its interchange rates on cross-border debit and credit card transactions in Europe, at least temporarily, and make other concessions to the European Commission, according to an announcement Wednesday. The plans have gained the approval of the commission, which some European banks and other payments players had feared would outlaw card interchange entirely. The arrangement will mark a return to cross-border interchange for MasterCard issuers starting in July. It follows suspension of those fees by MasterCard in June 2008, a response to the commission's December 2007 ruling that MasterCard's cross-border interchange fees violated European Union competition rules. MasterCard is appealing that ruling in the European Court of First Instance. Until the court decides, the card company has agreed to lower its interchange rate on cross-border debit transactions to 0.2% and the rate for credit transactions to 0.3%. These are fees issuers of MasterCard-branded debit and credit cards can charge acquirers on cross-border transactions. Acquirers pass on the fees to merchants. The lower fees compare with fees on debit transactions that range from about 0.4% to more than 0.75% MasterCard had maintained in 2007. Its cross-border fees for credit card transactions ranged from 0.8% to 1.9%. MasterCard also agreed to repeal higher "scheme fees" it imposed last October, which critics charged was a way for the card company to circumvent the interchange ruling. MasterCard also said it would be more transparent in its fees for both international and domestic transactions, including publishing interchange rates on its Web site. But the card company says the new interchange fees are only temporary and are not "adequate to sustain strong competition in the European payments industry." A MasterCard spokesperson tells CardLine Global sister publication Cards&Payments that "although we're very pleased the commission has accepted the legitimacy of interchange, it's still undervaluing the benefits merchants receive." Jonathan Todd, a spokesperson for European Competition Commissioner Neelie Kroes, says it would be "very difficult" for MasterCard to increase interchange rates if it loses its appeal. The commission is confident the Court of First Instance will uphold the December 2007 ruling, Todd says. In a statement, Kroes' office put MasterCard rival Visa Europe on notice that it continues its antitrust investigation into Visa's interchange fees. The commission had told Visa to take guidance from its December 2007 ruling against MasterCard. "What we have said today is we clearly do expect a level playing field," Todd says. Cross-border transactions account for no more than 5% of bankcard purchases in Europe, but the commission's approval of the new interchange rates for MasterCard will have broader implications because national financial regulators likely will use it to guide their decisions on interchange for domestic transactions. The commission's blessing for the new MasterCard fees is not sitting well with Brussels-based merchant lobbying group EuroCommerce. The group does not see a justification for any interchange, and prefers a fixed-rate pricing scheme for card transactions. If national regulators follow the commission's lead, "that would be extremely bad news for the consumer," Xavier Durieu, secretary general of the group, tells Cards&Payments.
