News, 22 December 2011
For several years now, the Finnish Competition Authority has followed the effects of the Single Euro Payments Area (SEPA) in the Finnish payment card market. As part of this assessment, the FCA has investigated the operating mechanisms and levels of interchange fees applicable to Visa and MasterCard card payments in Finland. Based on its investigations, the FCA has closed the file but continues to follow up the development of the level of the fees in Finland even in the future. If it is later found out that the level of interchange fees is not acceptable from a competition law viewpoint, the FCA will reopen the case.
The acceptability from a competition law viewpoint of the multilateral interchange fee (MIF) for cross-border payments with Visa and MasterCard cards is dependent on the level of the fee, according to the decision-making practice of the European Commission. To be acceptable, the interchange fees shall create efficiency benefits for consumers and retailers that exceed the anti-competitive effects. Efficiency benefits can only be expected to arise if the level of the interchange fee is sufficiently low. As a result of the Commission’s actions, the levels of the fees have decreased considerably compared to the previous level.
Grounds for closing the file
The assessment of the matter at the FCA was partially influenced by the fact that the Finnish payment card market is undergoing a considerable change. The principal provider of acquiring services of the Visa and MasterCard transactions has been Luottokunta in Finland. The number of market actors is on the increase, however, because the replacement of the bank card by the payment cards of Visa and MasterCard increases the number of transactions made by these cards and hence the attractiveness of the operations. In addition, the interchange fees are at a relatively low level in Finland compared to the rest of the Europe.
The FCA’s assessment was also affected by the fact that the Visa and MasterCard cases are still pending at the EU level. MasterCard has appealed the Commission’s 2007 decision to the EU Court, and Visa has not approved the level of MIF for credit cards as proposed by MasterCard in its commitments.
What is the interchange fee between banks?
The national bank card which has been widely used before will be replaced by the debit cards of Visa and MasterCard with the introduction of SEPA, and the decision to do so will be made by each bank individually. The pricing structures of these international card companies contain transaction-specific interchange fees. The national bank card system does not have corresponding fees.
The bank which receives the payment card transactions from the retailer (the acquirer) pays the issuing bank (the issuer) an interchange fee for each payment conducted by a payment card. This interchange fee provides a basis for the Merchant Service Charge paid by the retailer, and this is the cost to the retailer for accepting the Visa or MasterCard card payments.
Senior Research Officer Pirjo Aspinen
Head of Research Arttu Juuti