The European Union (EU) lawmakers voted on a new legislation on Thursday that would lower interchange fees on credit card and debit card transactions. This supports a more competitive payment system that is beneficial to businesses and consumers.
"Each year businesses suffer from unregulated and unjustifiably high fees when a customer chooses to pay by card," said Sharon Bowles, chairwoman of the European Parliament's economic affairs committee, to the Wall Street Journal. "Capping these transaction fees will mean businesses can and should be able to pass on savings to consumers."
With the new legislation, once considered and approved by European Union member states, interchange fees would be limited to 0.3 percent of the value of a credit card transaction and 0.2 percent of the value of a debit card transaction. The interchange fees are charged by a cardholder's bank to the merchant's bank every time a consumer makes a card purchase.
Lowering the interchange fees could save retailers €6 billion ($8.2 billion), which in turn could get passed on to consumers through lower prices.
The new legislation, which was proposed by the European Union's executive body European Commission last summer, dismayed the credit card companies. They were unhappy that the European Parliament's version included commercial cards such as company cards that were not included in the commission's first proposed legislation.
However, MasterCard and Visa Europe said that the lowered fees will hurt businesses and consumers. This could have them pay more because banks charge retailers more to make up for lost fees.
"MasterCard is concerned that today's vote in the European Parliament is bad news for consumers and small businesses in Europe," the company said in a statement to WSJ. "While the idea of capping fees may be politically attractive, it makes little sense if consumers and small businesses end up paying more for their cards."
Visa Europe, on the other hand, said the proposed new legislation was illogically and irrationally.
