Interchange fees: A done deal?

The news that Visa Europe has offered to reduce interchange fees on debit cards has yet to convince the European Commission that it should end antitrust proceedings.

At the start of this week, European Competition Commissioner Joaquin Almunia welcomed Visa Europe’s willingness to reduce interchange fees – by 60% for domestic transaction fees and 30% for cross-border fees – but is agreeing only to market test the proposal.

This is good news for retailers, anything that can reduce the transaction charges they pay is good news – but it should be welcomed with caution.

First of all, Visa is making no promises on cutting fees on credit cards. And second, Visa’s main rival MasterCard has already been through this process with the EC, but then angered retailers by trying to increase the membership fees banks had to pay – which retailers believed would be passed on to them. Eventually Mastercard dropped this plan.

The European Commission says that if the proposal is successfully market-tested the offer will be made legally binding, and the antitrust investigation into Visa Europe will no longer be pursued in relation to debit card fees.

But with the EC making no promises, and silence on what will happen to the fees on Visa’s credit card transactions, there is still much for retailers to potentially win or lose.