Debit Interchange Battle Just Getting Started

by Ron Mazursky 0

American Express released its second quarter earnings July 17 and reported stable, single-digit growth in United States charge volume and even stronger performance overseas.

But much of the accompanying commentary, however, focused on reports earlier this week from several news sources that claimed the European Commission will soon propose a cap on credit and debit interchange rates. These reports appear to be having a negative impact on Amex’s stock price, although such worry may be premature.

From what the media has reported, it’s unclear exactly what the cap will be. Bloomberg reported that the document they saw indicated 20 BPS for debit and 30 BPS for credit transactions, rates which Visa Europe and MasterCard have already implemented in the region.

The proposal’s impact on three-party systems such as American Express is also uncertain based on media reports. American Express does not believe their proprietary business will be impacted.

From Amex’s conference call:

The discount rate that American Express charges to merchants would not be regulated. Our proprietary consumer and corporate card businesses are not covered by the pricing caps.

None of the details will be confirmed until the formal proposal is published. And the publication will only be the beginning of a lengthy review and comment period.

Click here to read more from Bloomberg. Click here to read the transcript from Amex.