Settlement on Visa debit interchange fees aids SEPA

Brussels, 26 April, 2010 - Visa Europe welcomes the European Commission’s agreement today that, following public consultation, it will accept proposed commitments from Visa Europe on its multilateral interchange fees (MIFs) for intra-regional immediate debit transactions in the EEA. Visa Europe also welcomes the European Commission’s proposal to end proceedings on its immediate debit interchange fees.

Under the proposed commitments, Visa Europe will cap its weighted average intra-regional MIF for immediate debit transactions at 20 basis points (0.2%) for four years. The same cap will apply to domestic immediate debit rates that defaulted to the intra-regional MIF rate before 10 March 2009 and continue to do so, and to domestic immediate debit rates set directly by Visa Europe. Many of these countries have their own arrangements for setting domestic interchange or have few immediate debit card transactions, therefore the overall impact is limited.

Visa Europe President and Chief Executive Officer, Peter Ayliffe, said: “The proposed commitments on immediate debit interchange fees are an important step towards the achievement of Single Euro Payment Area (SEPA) and the continued displacement of inefficient cash transactions in Europe. It will provide much needed legal certainty to the industry and provides a mechanism for a revision to the average 0.2% rate if further data becomes available on the costs of different means of payment, including cash. I am satisfied that these commitments will lead to the establishment of a suitable cost of cash methodology which can be applied both on a cross-border and a domestic basis.

“In proposing these commitments Visa Europe has acted in the best interests of consumers, retailers and our member banks. Visa Europe has always ensured that its payment cards provide substantial benefits to both consumers and retailers”.

The commitment to a cap to Visa Europe’s immediate debit MIF is calculated under the so-called “merchant indifference” test, developed in recent economic literature. In particular, the Commission has calculated the EEA wide immediate debit cap by averaging the results of two central bank studies conducted in the Netherlands (in 2005) and Sweden (in 2007) measuring the costs of cash and card payments in their respective countries.

As the data on which the Commission has based its current calculations are incomplete, and do not yet include all relevant cost categories, the commitments set out a clear mechanism for revising the 0.2% cap when further data becomes available. The European Commission has already launched a pan-European study on the costs of different payment methods. Visa Europe has been sharing its know-how in the development of such studies with the Commission and has provided the Commission with a detailed list of points [see annex] it considers should be taken into account in any robust and reasonable cost study. The proposed commitments note that Visa Europe will be further consulted on the Commission’s methodology going forward. Visa Europe looks forward to working closely with the European Commission in this regard.

The proposed commitments highlight the importance of establishing a common methodology which can be used by competition authorities across SEPA to calculate MIFs for immediate debit transactions in their local jurisdictions, and will establish a level playing field for all four party debit card systems operating in Europe.

The proposed commitments relate to MIFs for immediate debit transactions only and do not affect credit, deferred debit or commercial MIFs. The application of the so-called “merchant indifference” test to credit and deferred debit transactions is considerably more complicated in circumstances where cash is not a realistic alternative to credit. Visa Europe and the European Commission will continue their ongoing discussions on these complex issues in the coming months with a view to reaching an agreed outcome. Pending the outcome of these discussions, Visa Europe’s MIFs for intra-regional credit and deferred debit transactions will remain unchanged.

Notes to Editors:

About Visa Europe

In Europe, there are over 390 million Visa debit, credit and commercial cards. In the 12 months ending December 2009 those cards were used to make purchases and cash withdrawals to the value of €1.4 trillion. 11.2% of consumer spending at point of sale in Europe is with a Visa card.

Visa Europe is owned and operated by more than 4,000 European member banks and was incorporated in July 2004. In October 2007, Visa Europe became independent of the new global Visa Inc., with an exclusive, irrevocable and perpetual licence in Europe. As a dedicated European payment system it is able to respond quickly to the specific market needs of European banks and their customers - cardholders and retailers - and to meet the European Commission’s objective to create a true internal market for payments.

Visa enjoys unsurpassed acceptance around the world. In addition, Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in over 200 countries.

For more information, visit


Principles Visa Europe considers must be addressed in any cost of cash study by the European Commission

The methodology should:

  1. Seek to measure the costs that merchants would incur if they used cash to handle the same transactions that are typical of cards.
  2. Do not estimate the costs of cash for merchants who do not use cards.
  3. Seek to measure the costs that merchants incur in using cash to handle the average Visa Europe cross-border transaction.
  4. Obtain information from merchants in a representative sample of European countries, including those which collectively account for the majority of Visa cross-border card use.
  5. Focus on merchants from industries or sectors that handle a lot of cross-border card transactions. Assign greater weight to data from merchants in those industries or sectors that represent a larger proportion of total cross-border card transactions.
  6. Measure the amount of time that it takes to process a cash transaction of the same value as the average Visa Europe card transaction within each country.
  7. Measurements of transaction time should exclude any portion of the time dedicated to productive activities such as packing goods, or marketing other goods or services.
  8. Estimate merchant costs through a series of questionnaires or interviews that solicit information concerning the resources, including staff time, that merchants dedicate to processing payments by cash and card. The methodology should not rely on merchants to report estimates of their own costs.
  9. Derive independent estimates of the costs to merchants of the resources identified. Examples include average wages, and the costs of relevant payment processing equipment.
  10. Estimate the relationship between merchant costs and transaction size.
  11. Do not disclose to merchants the intended use of the results to calculate interchange fees, and do not reveal the identities of the interested parties: the European Commission and Visa Europe.
  12. Estimate the fees that merchants pay banks for handling cash.
  13. Estimate a reasonable and competitive margin for acquirer services, based on information from the countries in Europe that have the most competitive acquiring markets.
  14. Estimate separately the costs of using cash for card transactions where the cardholder is not present. The costs of using cash should be estimated for the provision of the same service quality as associated with cardholder-not-present card transactions.
  15. Compare charge-backs on card transactions to the costs that merchants incur refunding comparable cash transactions.
  16. Provide Visa Europe access to all data gathered for the purpose of estimating merchant indifference.
  17. Provide Visa Europe all calculations performed in deriving merchant indifference estimates from the data gathered.