The Latest Assaults on Card Fees
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I said last year that I can't really take a summer vacation - too many things seem to happen in payments while I am away. This year was no different with many interesting stories to catch up with from new chiefs at MCX and Visa Europe to PayPal trying out check-in payments in the UK to the latest announcements from Isis (I will try to review those in a separate blog.) However, two big news items really caught my eye, both to do with further assaults by regulators on card interchange fees. As Gareth already described in his blog, the European Commission confirmed its intentions to cap interchange fees across Europe to 0.2% for debit and 0.3% for credit. The enactment is expected to take one to three years for European Parliamentary approval and approval by a majority of EU member states. Caps will start applying to cross-border transactions two months after final approval and for domestic transactions after 24 months, so some of the caps could be introduced as early as late 2014. If and when this happens, it will have major repercussions to the industry - the banks will have to seriously question the viability of offering credit cards, are likely to be more open to experimenting with non card-based solutions (e.g. bank account), yet the merchants incentives to accept anything other than cards and card-based solutions would be seriously diminished, dampening the prospects of innovation and start-ups. If the EC announcement was expected, the news from the US was anything but. While the industry was still getting to grips with the aftermath of Durbin amendment, the District Court Judge Richard Leon threw out the $0.21 debit interchange fee cap set by the Federal Reserve and suggested that the Fed should review and lower the cap further. If the cap went down to $0.12 or even lower, the banks would stand to lose another $4bn or more in revenue. The Judge's decision also appears to impose more routing requirements than the Fed's ruling did, which even in the original implementation turned out to be a big stumbling block for EMV. What will this latest turn of events do for EMV prospects in the US? If there is one thing certain is that it will only create more uncertainty for the industry, making the original dates for the liability shift even more difficult to achieve.