On 29th January 2014, in London, I was invited by Vendorcom to speak about multilateral interchange fees (MIFs) from a payments solution provider perspective. Together with industry experts from companies such as ACI Worldwide, Elavon, Merchant Services, Retail Decision, Verifone, Retail Decisions and industry bodies such as the UK Cards Association and the PAN Nordic Card Association, we discussed what is happening within the payments industry from a MIF perspective.
I began my presentation with a brief history of the MIF debate, going back some 17 years, to a complaint made by EuroCommerce about Visa Europe’s fees to merchants, up to last year when the proposals for EU regulation on MIFs were put forward by the European Parliament, with the overall aim of creating an internal market for payments in Europe by enhancing consumer choice and protection, encouraging innovation, ensuring a level playing field and increasing transparency.
In outlining the key features of the proposed regulation, I highlighted the split implementation time frame, with cross-border caps coming into play immediately and domestic caps coming in two years after the regulation is published. This discrepancy will give advantage to larger, cross-border players, with local providers not being able to compete. Similarly, small merchants who have little cross-border ecommerce opportunity will not be able to take advantage of the reduced rates, as compared to the larger merchants. If a goal of the Regulation is to create a level of harmonisation, the two year gap between implementation of the two caps seems contrary to the goal, leading as it may, to a more fragmented landscape.
In examining the potential impact of these proposed EU regulation, I joined both Paul Rodgers (Chairman – Vendorcom) and Richard Koch (Head of Policy – The UK Cards Association) in highlighting the potential risk to innovation/competition. By reducing the card issuing revenue, what incentive will there be for new players to come to market?! Some of them may have no choice but to exit the market, which as well as the effect on innovation will also result in fewer players, thus less competition and consumer choice and the real likelihood of increased prices.
In conclusion, my advice was to ensure a full understanding of the proposals as written and to keep up to date with progress of the Regulation and to provide input within our businesses to finance and technical departments to look at the potential impact on business processes/systems of the proposed changes and to allocate resources to be able to deal with the changes. In addition, I encouraged all affected parties to engage with policy makers to ensure that the latter are properly informed of potential impacts and also to continue to seek guidance from the regulators as to grey areas – and to carefully evaluate business models to ensure they’re not too greatly biased by interchange.
To access my full presentation please click here: MIFs – An IPSP’s Perspective
And the video presentation Ignacio González-Páramo on Multilateral Interchange Fees.