In case you missed it in the mainstream press last week, Mastercard and Visa have made a further concession to the EU over their demands for lower interchange fees.
Both companies have agreed to cut the fees they charge retailers when they process debit or credit cards issued outside the EU.
Mastercard and Visa are already obliged to cap interchange fees at 0.2% for debit cards and 0.3% for credit cards on transactions made in the EU on EU-issued cards. From 19th October, this cap is now voluntarily extended to all Mastercard and Visa cards issued globally.
Online purchases made from EU retailers with non-EU credit cards are excluded. Mastercard and Visa have voluntarily agreed a separate cap for online transactions of 1.15% for debit cards and 1.5% for credit cards. The justification for this is that there is greater fraud risk with online spending – the cost of which is pushed back to the card issuer – and that PayPal, Alipay etc provide greater competition in online payment processing.
This will have no impact on UK cardholders, but it will start to tighten the screws on the profits of foreign-issued credit cards. In time, this is likely to lead to the end of the high sign-up and spend incentives seen in, say, the United States.
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