The announcement due from European
Commissioner for Competition Neelie Kroes regarding the future of
interchange fees charged to retailers by banks issuing MasterCard
credit cards has been delayed by differences of opinion within the

The EC had backed down from a threat to completely abolish
interchange earlier this year, but Kroes has made clear her
determination to crack down on what she sees as indefensibly high
fees. It is believed that Kroes wants to introduce an ‘at par’ fee
system, whereby retailers would pay only for transaction processing
and extra charges for free credit and fraud insurance, which
interchange fees currently include. However, European Commissioner
for Internal Market and Services Charlie McCreevy fears that
scrapping interchange fees in favour of an ‘at par’ system would
make card schemes unfeasible, and potentially hinder the launch of
the Single Euro Payments Area in January 2008.

Xavier Durieu, secretary general of European trading association
EuroCommerce, told news service Reuters: “There is going to be a
decision and what we know is there are some internal diverging
views within the European Commission and more specifically the
resistance seems to be coming from DG Market (its internal-market

Calls for a decision

MasterCard had warned the EC earlier this year that its opacity
regarding interchange fees could deter banks’ investment in SEPA
initiatives. (See “Visa
and MasterCard defend interchange fees in Europe
“.) MasterCard
said that banks may not be inclined to invest in SEPA while the EC
line on interchange fees remains unclear. The European Central Bank
has also called upon the EC to reach a decision on the issue,
warning in its July 2007 SEPA progress report that market
uncertainty was obstructing efforts to implement SEPA.

Eric Tomlinson, MasterCard’s senior vice-president and group head
of debit product development Europe, told CI: “It’s not just
frustrating for MasterCard, it’s one of the key inputs into
people’s business case and until this is sorted, how do we know how
to move our business forward? It’s one of the key factors missing
from SEPA becoming a reality.”

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