Mastercard and Visa have reduced their inter-regional Interchange rates (sometimes referred to as inter-regional MIFs). On October 19th 2019 the payment giants cut the inter-regional interchange rates by an average of 40 per cent. This followed an extensive legal stand-off between the payment card companies and the European Commission. Both companies were under a lot of pressure from the Commission to ‘reduce the costs borne by retailers for accepting payments with cards issued outside the EEA’.

Find out how this might affect your business as we take a closer look at what these changes mean.  

How will the changes affect consumers and merchants?

But what does this mean for you? European merchants processing transactions from payment cards issued outside of the European Economic Area will be able to dramatically reduce the costs of inter-regional trade, both in terms of e-commerce and payments made in person by people visiting different regions. 

Both Visa and Mastercard are tied to maintaining these rates until April 2025 (on a five years and six months commitment). If Visa or Mastercard are found to be in breach of their commitments to the lower fees they will suffer hefty fines – of up to ten per cent of their annual turnover. The reduced fees also apply to offshoot companies owned by the giants, such as Maestro, Visa Electron and V-PAY credit and debit card brands.

The interchange fees are now the following percentages of the value of the transaction, which is an approximate 40% deduction to the former fees.

• 1.15% for debit cards used to make an online payment (Card-Not-Present)
• 1.5% for credit cards used to make an online payment (Card-Not-Present)
• 0.2% for debit cards used with the payee present (Card-Present)
• 0.3% for credit cards used with the payee present (Card-Present) 

These adjustments will have a particular impact on those whose European revenue is contributed to by large numbers of non-European customers, including travel companies, gambling platforms and luxury retailers. 

See the tables below for the breakdown of Visa’s interchange fees and more specifics of the Mastercard interchange fees.

Why did the commission enforce the changes?

The fee cuts will ensure that the most cost-effective method of purchase is always using a secure payment method such as credit or debit card. The higher fees applying to the online payments reflect the higher risk nature of these transactions, as well as their comparative economic value, and mirror fees set by payment management competitors such as PayPal. 

The Commission say they were ‘concerned that inter-regional MIFs may anti-competitively increase prices for European retailers accepting payments from cards issued outside the EEA and in turn lead to higher prices for consumer goods and services in the EEA.’ Read the full press release for more information. 

The legislative changes are a part of a greater anti-trust case against both card issuers that has been ongoing since 2007. It’s hoped that in reducing the higher former fees, which were said to break the European Bloc’s competition laws, the matter can be put to rest – so long as both companies honour their commitments. 

Both of the card issuers mentioned have faced charges and fines for being in breach of the competition laws, and the fee cuts are legally binding. Both of the companies are required to publish their interchange fees online and are subject to monitoring. 

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