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MEPs vote to cap card processing fees

The European Parliament and the European Commission have voted to cap bank processing fees for card payments. Find out how this landmark piece of legislation stands to impact your business and your customers.

MEPs have backed the European Commission's proposal to reduce banking fees for card payments across Europe. In March 2014, the European Parliament voted to cap these 'interchange' fees at 0.3% of the transaction value for credit card transactions. For debit card transactions, it was capped to 7 euro cents, or 0.2% of the transaction value, whichever is lower.

These caps would apply to both cross-border and domestic transactions in the EU and would take effect one year after the rules enter into force.

Time to market

Due to the on-going discussions and negotiations between the European Commission, European Parliament and the European Council, it is unlikely that a decision will be formed before Q4 2014 or the first half of 2015. It will likely be agreed in 2015, with an implementation 12 months after. Taking this into account it is foreseen that a change in Interchange rates will not become applicable until mid to late 2016.

Business and consumer impact

Card payment processing fees currently cost EU retailers over €10 billion (approx. £8.2 billion) a year, according to the European Commission. The new regulations aim to reduce this burden and make fees more transparent across EU member states.

According to the European Commission, these regulations will benefit business owners, who will pay their banks less in commission for each card payment they accept. Consumers also stand to benefit from these changes, as the cost of card processing fees is often absorbed into the products and services they buy. Lower fees for banks mean lower fees for merchants, which may mean lower prices for consumers.

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