European Parliament backs cap on credit and debit card processing fees

cep financial market expert Eckhardt says cap is not a wise measure: May even obstruct market entry for new card schemes

The European Parliament on Tuesday backed a deal to cap the fees retailers pay to process debit and credit card transactions. For cross-border debit card transactions, the agreed fee cap under uniform EU-wide rules is 0.2 per cent of transaction value. For domestic debit card transactions, at parliament’s request, the same 0.2 per cent cap will apply after a five-year transition period. For credit card transactions, fees will be capped at 0.3 per cent of transaction value. The member states are allowed to set a lower fee cap for domestic credit card transactions. cep expert Philipp Eckhardt believes the cap on fees is not a wise measure. “Statutory upper limits on interchange fees affect existing and developing card schemes in equal measure,” Eckhardt explained. “They may even obstruct market entry for new card schemes because new players will not be able to offer the banks more attractive conditions.”