Businesses and consumers do not yet benefit from a fully competitive Internal Market in payment cards, according to a preliminary report published by the European Commission yesterday as part of an inquiry into the payment cards industry.
The 185-page report, based on responses from many market participants, reveals several potential barriers to entry into payment card markets, such as technical obstacles and practices by banks and networks that may raise costs for entrants.
A total of 23 billion card payments are made annually in the EU with an overall value of €1.35 billion. The report found that consumers pay 100% more for MasterCard and Visa in some countries than in others. The fees for businesses vary by up to 500% across the EU for Visa and up to 650% for MasterCard.
It also says that card acceptance fees are used to 'tax' sales at business outlets, as banks charge retailers a fee for every use of a payment card. This leads to inflated retail prices by up to 2.5% of total consumer purchases and aggravates the effects of rigid market structures.
Small and medium enterprises pay higher fees than large ones for the use of a payment card. These differences amount to more than 70% and do not seem to be justified by transaction costs.
The industry, consumers and other interested parties have until 21st June to submit their views and comments on the preliminary findings. If the preliminary findings on payment cards are borne out by this consultation, the Commission says it will consider action under EC Treaty antitrust rules in individual cases.
In addition, the results of the sector inquiry will feed into the Commission’s analysis of whether amendments to the regulatory framework for payment cards are necessary. The Commission will publish in July a report on the second part of its retail banking inquiry – focusing on current accounts and financing of small firms.
Competition Commissioner Neelie Kroes said: “The payment cards industry in Europe remains national and some local players are preventing competition from developing. This pushes up payment card costs for consumers and businesses. Competition law and sector regulation must work together to create a better environment for business.”
Despite the existence of internationally accepted payment cards, historic reasons and barriers to entry mean that much of the industry operates on a purely national basis, with 25 separate markets in the EU.
The Commission believes that a more integrated and competitive payment card industry could create significant efficiencies for businesses, boost competitiveness and innovation and raise consumer welfare by delivering better services at lower prices. Making all forms of cross-border payments, including payment cards, as easy and affordable as domestic payments could save the EU economy between €50 and €100 billion per year, it suggests.
