Beware the Unintended Consequences of New EU Interchange Payments LegislationJavier Perez | December 5, 2012
As the European Commission considers which route to take to achieve its objective of advancing electronic payments throughout the EU, including the possibility to introduce new interchange legislation, it needs to tread carefully…
It is widely recognized that electronic payments make our lives easier. Merchants, consumers and governments all see benefits in speed and in greater security and safety. In fact, it is widely known that electronic payments minimize fraud, reduce the black and grey economy and are more efficient than cash.
There has been a lot of activity at EU and national level in discussing electronic payments. We welcome the discussion, but feel that the Commission is setting a course towards new payments legislation without considering the full implications. You only have to look to the United States, Australia or even Spain to see the unintended consequences of government intervention. Recent experience has shown that this type of legislation could inhibit rather than encourage the very growth in electronic payments that the Commission wishes to stimulate, and stifle the benefits that electronic payments bring to society:
- The reduction in interchange by more than 55% in my native Spain between 2006 – 2010, had a negative im pact for consumers. According to recent academic research, Spanish cardholders had to bear a hefty increase of € 2.35 billion in annual card fees, so this was hardly a win for the consumer, was it?
- Recent MasterCard research among European consumers showed that 75% are worried that they will pay more for their cards if interchange fees are reduced, and almost half of them feel retailers won’t pass on card acceptance fee reductions in the form of lower retail prices.
I completely agree that the EU payments industry must stay as competitive as possible, but the Commission must carry out a thorough and robust economic impact assessment of the consequences of the measures it intends to introduce, and use this to inform its thinking.
MasterCard fully shares the Commission’s vision for a secure, efficient, competitive and innovative European electronic payments industry. However, we hope that it ‘looks before it leaps’, and fully assesses the implications of its plans, before making a decision it – and European consumers altogether – could later on regret.
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