Credit card company fears commission move

16.01.07 @ 09:25

  1. By Helena Spongenberg

The European arm of the world's largest credit-card company has said banning transaction charges would harm consumers and destroy a European Union revamp of payment systems.

  • Visa - argues the payments are needed to help consumers (Photo: Lotus Head)

Visa Europe is seeking to sway Neelie Kroes – the EU competition commissioner - who will present the final result of her investigation into the payment-card industry on 31 January.

Peter Ayliffe – the head of Visa Europe - told journalists in Brussels on Monday (15 January) that he fears Europeans will stop using payment cards unless the European Commission lets card companies keep setting the rates banks charge for credit-card transactions.

The credit-card companies do not get any money from the fees, but can use their ability to set the fees to influence banks to distribute their particular card to bank customers.

But retailers have complained that the fees are too high and unclear, which led to the commission launching the investigation in June 2005.

The retailer's bank pays the card issuer's bank an "interchange" fee - a percentage of each purchase - to process card-based transactions.

The commission already in 2002 forced Visa, in a settlement that expires this year, to revise the way it sets the fees and questioned the need for the interchange fees in an interim finding last April.

Back then, Ms Kroes expressed concern about a lack of competition in the sector and "scandalous" profits earned on payments cards.

"You cannot run a payment system without some level of interchange," Mr Ayliffe said, according to Bloomberg.

"The danger is that mis-placed intervention by regulators leads to the end of cards for all, as costs for consumers will undoubtedly increase," he explained, according to AFP.

Ms Kroes' spokesman, Jonathan Todd, said on Monday that all industry comments would be taken into account.

"It is legally possible for the European Commission to require a system to be abolished if it's in violation of competition rules," he told journalists in Brussels, but added that he was "not saying that we are going to get rid of interchange fees."

Nearly 321 million cards have been issued by banks in Europe using Visa's system, accounting for 1 in every 9 euros spent or €1.2 trillion a year, Reuters reports.

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