The European Commission announced that Visa and Mastercard will continue to comply with the established tourist card fee caps for another five years.
A 2019 agreement called for credit card companies to cap fees on non-EU debit card transactions at European retailers at 0.2%. Visitors who use their credit cards in EU shops pay a 0.3% fee. For online transactions, the fee caps are 1.15% for debit cards and 1.5% for credit cards.
The credit card rivals agreed to extend the current deal to 2029 to avoid an investigation by European regulators and mitigate financial penalties. However, there are other upsides for Visa and Mastercard in the deal. According to Visa, the agreement lends greater clarity to a complex cross-border landscape. The company said the deal creates a framework that accounts for the fact that “cross border, e-commerce transactions are fundamentally different to in-store payments.”
Stepping In
Merchants have complained for decades about credit card interchange fees, and lawmakers have begun to step in. Visa and Mastercard’s closely scrutinized $30 billion settlement with merchants was not approved by a judge who said it was too little restitution to long-suffering retailers.
The deal gave merchants a 0.04% break on interchange fees for three years but drew criticism from retail organizations who said it was too small a reduction from interchange fees that typically range between 1.5% and 2.5%.
A Merchant Win
Merchants won another interchange fee fight after the U.S. Supreme Court ruled against the cap on interchange fees in debit card transactions. The high court said the $0.21 cap on debit card fees was too high, and retailers have pushed for fees to be capped at less than half that amount.
The Supreme Court’s decision was far from the final ruling on swipe fees. The current card-centric environment has made credit card companies extremely powerful, and regulators will continue to scrutinize them.
Even though the European Commission indicated it was satisfied with Visa and Mastercard’s decision to extend the tourist fee caps, it said it would not hesitate to open an investigation if fees established under the current agreement don’t appear appropriate anymore.