21st Mar 2018


Credit card companies are pocketing dazzling profits

  • Retailers in Europe pay a yearly bill estimated by the European Commission to be over €10 billion to banks for accepting debit and credit cards. (Photo: Lotus Head)

Payment card companies such as Visa and Mastercard and the banks that issue their debit and credit cards have been pocketing dazzling profits as a result of unfair competition.

After years the European Union is finally about to end this situation with regulation. This could spur fair competition in the payment markets. However, the regulation risks being undermined in the European Parliament.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Ironically the politicians who claim to trust the internal market and competition are harming the attempt to ensure fair and efficient markets.

Retailers in Europe pay a yearly bill estimated by the European Commission to be over €10 billion to banks for accepting debit and credit cards.

Part of this can be justified to cover for the costs of installing and operating card payment infrastructure. However the prices of payment services inflate to absurd proportions due to a lack of transparency about the real costs and a lack of effective competition.

Currently, market mechanisms are put on hold in this segment. The costs are based on the fact that for every transaction, retailers pay a fee to their bank known as "interchange", to compensate for transaction costs.

These fees are set by card schemes.

Given the situation of an effective duopoly on the European payment market, it has become almost impossible for retailers to refuse the acceptance of the big two card schemes, VISA and Mastercard, almost regardless of the price they ask.

Since the banks of consumers and retailers share the fee revenues, they are satisfied with high fee levels. This leaves Visa and Mastercard with an incentive to raise the fees, instead of lowering them - a clear abuse of market power.

New and innovative payment service providers are unable to offer the same fees to banks. As a result, they fail to penetrate the payment market and to offer a better deal for retailers and consumers.

The Commission tries to counter this complete lack of competition by at least three important measures.

Firstly, it proposes a cap on the levels of interchange fees for the most widely used payment cards which could reduce the yearly fees by 8 billion euros. Secondly, it provides for the opportunity for merchants to make use of cheaper payment services provided in other EU member states. Finally, it tries to guarantee the right of merchants to refuse payment cards that charge excessively high fees.


Unfortunately, Pablo Zalba, a Spanish member of the conservative EPP-group who leads the work on the regulation in the European Parliament, is torpedoeing all three measures.

He is proposing to replace a simple fixed percentage cap of the fees with a complex weighted average which would make it impossible to get the required transparency on the fee levels, and can only be implemented with a lot of bureaucracy.

Secondly, he is proposing to narrow the definition of cross border transactions by excluding from the scope the situation where a merchant uses a foreign payment service provider.

This thereby effectively limits the possibility of, for instance, a Spanish merchant to choose a better or cheaper payment service provider from Portugal.

Finally, the Parliament's rapporteur wants to oblige merchants to accept all cards of the same scheme, regardless of their fee level. It is incomprehensible and against the logic of competition to refuse giving merchants the necessary bargaining power to negotiate the lowest price or ultimately refuse cards with unreasonable fee levels.

Fair competition

The Green group in the European Parliament has come up with counter proposals to ensure that merchants and consumers will be able to benefit from real competition in the European payment market.

There should be an effective cap on the interchange fee level for credit cards and a full ban for fees on debit cards. Merchants should be able to refuse cards when they charge excessive fees.

A European market for payments should offer the best service to retailers and consumers instead of the highest profits for banks and the dominant card schemes.

If the conservatives in the European Parliament are as faithful to fair competition as they claim to be, they should revise their position and take such proposals seriously.

Bas Eickhout, Sven Giegold and Jean Paul Besset are Green MEPs

Controversial consumer credit bill goes to MEPs

A draft EU law designed to reduce differences between 27 different sets of national consumer credit rules is heading for a crucial test in the European Parliament, with MEPs giving the proposal a mixed reaction ahead of a vote on Wednesday.

MEPs back cap on credit card fees

MEPs have backed plans to cap card payment fees charged to shops by credit card giants Mastercard and Visa in a move aimed at saving €6 billion per year.

'Denial' - is meat the new climate change?

The European Parliament's agriculture committee meets on Tuesday, with speculation that the EPP will vote against a report on the EU plant protein plan if it mentions switching away from animals to plant-based diets.

Moria refugee camp is no place for people

Two years on from the highly-controversial EU-Turkey deal, many thousands of refugees are still trapped on Greek islands. One of them offers an open invitation to EU leaders to see their inhospitable conditions at the Moria refugee camp on Lesbos.

Column / Brussels Bytes

EU e-privacy proposal risks breaking 'Internet of Things'

EU policymakers need to clarify that the e-privacy should not apply to most Internet of Things devices. The current proposal require explicit user consent in all cases - which is not practical.

News in Brief

  1. EU leaders expected to approve Brexit future talks guidelines
  2. Tusk: EU must 'continue to engage' with US on trade
  3. European elections set for 23-26 May 2019
  4. EU tries to find common candidate for top UN food job
  5. Facebook post triggers Norway no-confidence vote
  6. Merkel: 'no reason' to sanction Schroeder for Russia support
  7. MEPs and Council strike deal on posted workers' rights
  8. EU parliament to investigate Facebook data 'breach'

Stakeholders' Highlights

  1. EUobserverHiring - Sales Associate With 2+ Years Experience - Apply Now!
  2. EUobserverHiring - Finance Officer With Accounting Degree or Experience - Apply Now!
  3. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  4. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  5. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  6. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  7. Martens CentreEuropean Defence Union: Time to Aim High?
  8. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  9. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  10. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  11. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  12. EPSUWill the Circular Economy be an Economy With no Workers?

Stakeholders' Highlights

  1. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  2. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  3. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework
  4. Mission of China to the EUDigital Cooperation a Priority for China-EU Relations
  5. ECTACompetition must prevail in the quest for telecoms investment
  6. European Friends of ArmeniaTaking Stock of 30 Years of EU Policy on the Nagorno-Karabakh Conflict: How Can the EU Contribute to Peace?
  7. ILGA EuropeCongratulations Finland!
  8. UNICEFCyclone Season Looms Over 720,000 Rohingya Children in Myanmar & Bangladesh
  9. European Gaming & Betting AssociationEU Court: EU Commission Correct to Issue Guidelines for Online Gambling Services
  10. Mission of China to the EUChina Hopes for More Exchanges With Nordic, Baltic Countries
  11. Macedonian Human Rights MovementCondemns Facebook for Actively Promoting Anti-Macedonian Racism
  12. Nordic Council of MinistersGlobal Seed Vault: Gene Banks Gather to Celebrate 1 Million Seed Collections