Retailers doing business within the European Union may not have to worry about high interchange fees any longer.
Yesterday, the European Commission recommended that these fees be capped at 0.2% for debit card transactions and 0.3% to credit card purchases. These recommendations would ensure a consistent interchange fee for all countries in the EU. Currently, these swipe fees can vary widely from one country to the next.
Some analysts predict this will save retailers nearly $8 billion per year. Hence, this represents quite a hit to the profits of credit card processors doing business in the European Union.
Interchange fees are paid by the merchant to the credit card company every time a person uses a credit card at a store. Some stores increase their prices to make up for these fees, while others absorb them to maintain their customer base. Executives in the European Commission are now taking a stand against the enormously high fees in certain countries.
The new recommendations also suggest a legal split between credit card companies and the organizations that process transactions. This could create more competition and a more even distribution of fees. Some issuers, like American Express, do not go through other businesses for processing. Thus, they would be excluded from the rules. For other companies like Visa and MasterCard though, this could be quite a change in doing business with the European Union.