Unfortunately, the European Commission proposal and the European Parliament's position would lead to a disruption in the market that disrupts the consumer experience in your business leading to less revenue for your business.
Although this seems to be a profitable approach for businesses, the inefficiency and cost it causes for consumers will lead to less revenue for businesses.
The EC interchange fee cap focuses on the merchant's needs and ignores the consumers, which in turn, hurts both parties.
Increasing the efficiency and transparency of electronic payments increases consumer purchasing power that in turn improves and fosters the digital economy. Everyone wins.
Merchants receive attractive benefits from accepting cards, the most important one being: increased sales.
All risk is taken on by card issuers in the event the consumer doesn't pay for the transaction at no cost to the merchant. The value of this "payment guarantee" exceeds the cost of interchange.
Commercial cards (credit) provide a total net benefit of €9.3bn across the EU-UK and Germany taking c.34% of total net benefits as a result of having the highest usage across the EU.
This interchange fee cap has the potential to reduce the availability of credit of €372m for smaller and medium enterprises and merchants across Europe. Reduced credit availability also means that the cardholders who purchase from small and medium enterprises will have less credit available to spend.
Can you afford to subsidize billions in profits for big retailers? Big retailers are lobbying the EU to impose a cap on the interchange rate so they can make more profits at the expense of consumers and small merchants. The interchange cap desired by big retailers will raise fees, limit access, and reduce benefits such as rewards at the expense of you and smaller merchants.
Many small and medium enterprises accept cards as merchants because they simplify the process of purchasing inventory and supplies by replacing the cumbersome purchase order and cheque writing process traditionally used for these operations. While this may seem like a relatively modest benefit, it can be extremely important to small merchants for managing cash flow. Across the EU, late and unpaid payments cost small and medium enterprises €350bn. In the UK alone, £36.4bn is reportedly owed to small and medium enterprises, with 35% claiming a debt of £20k would be enough to put them out of business. Assuming the average transaction value stays the same, a reduction in total card volume by 40% will reduce net benefits by €1bn for merchants even with the reduced merchant service charges, making it more difficult for merchants to justify the cost of accepting commercial cards.
Assuming the average transaction value stays the same, a reduction in total card volume by 40% will reduce net benefits by €1bn for merchants even with the reduced merchant service charges, making it more difficult for merchants to justify the cost of accepting commercial cards.
Larger merchants are able to negotiate to obtain the full cost reduction from interchange fee regulation while SMEs are not. This puts smaller merchants at a disadvantage.
With declining volumes of bank lending (for example in the UK this has been decreasing at a rate of 4% per annum from 2010), commercial cards are a key form of quick credit for small and medium enterprises, with as much as 55% relying on business credit cards in the UK.
Retailers benefit from the use of credit cards through higher sales, lower costs of cash transportation and for securing cash on the premises, fewer losses from the use of cash, more efficient income management and a guarantee that they will receive payment.
Cards are better than cash. For consumers AND businesses. They take the hassle out of doing business together.
Electronic payment systems help small businesses compete on equal footing with competitors of all sizes.
Big retailers are lobbying the EU to impose a cap on interchange rate so they can make more profits at the expense of consumers and small merchants.
They are the key to expanding revenue, improving cash flow and streamlining accounting.
Electronic payments are a solid, well-managed network that ensures transaction ease, accuracy, and record keeping for consumers and merchants.
Can your business afford to subsidize billions in profits for big retailers?
Interchange caps have been implemented in some countries and the negative effects are overwhelming: In Australia, interchange fee caps have been implemented and as a result, consumers now pay 50% more for their cards. Australian small merchants now pay up to ten times more to accept card payments than large merchants. Fees for standard four-party credit cards increased by 22% between 2001 and 2004, while annual fees for rewards cards increased by 47%-77%. As a result, cardholders in Australia are now paying approximately AU$480 million more in additional fees for credit cards each year. Meanwhile, the value of reward points for four-party cards has declined by approximately 23%. The interchange cap has also benefited merchants to the extent of approximately AU$850 million per year but merchants have yet to show evidence these savings have been passed on to the consumers. On average, surcharges on users of four-party cards have exceeded average merchant service charges. In 2002, the Reserve Bank of Australia reduced interchange fees by some 50%, saving retailers AU$850 million a year. Unfortunately, this means consumers are paying some AU$500 million more in additional card use fees to cover the shortfall while the benefits have declined. This has translated into 22% more in annual fees for standard credit cards and 77% more for reward cards. On average, surcharges on users of four-party cards have exceeded average merchant service charges.
If the EU sets interchange rates, you can anticipate a requirement for a minimum purchase amount for consumers, requiring cash only, or charging a fee for using a card, which all leads to a loss of revenue.
Electronic payments give you control of your business's destiny, freedom from unnecessary tasks and processes, security from a simple, well managed system of safe payments and money management, and time to concentrate on your work passion with the means to enjoy life outside of work.
In Australia, the interchange cap reduced incentives for new entrants to enter the industry, and has made it more difficult for smaller issuers to compete.
In Spain, interchange fee caps have been implemented, and as a result, there have been a 50% increase in annual fees for standard four-party payment cards. That's a total cost to consumers of €2.350 billion over a five-year period. Standard four-party payment cards operations average dropped from €52.1 in 2005 to €44.3 in 2010, while the ATM operations average rose from €91.2 to €117.2. A 2005 reduction in interchange of almost 60% resulted in a 50% increase in card fees. Spanish merchants have received a reduction of €2.749 billion from interchange capping during this five-year period and there is no evidence that even a fraction of this cost saving has been passed on to consumers via reduced prices or through an improvement of the services provided.
In the United States where interchange fee capping was implemented, many no cost or low cost bank accounts were eliminated. Consumers now pay increased fees for basic deposit account services. In the United States, legislation in 2010 implemented a reduction in interchange fees of nearly 50%, saving retailers an estimated $8 billion a year, yet consumers found that they were paying more for the same products while paying higher charges for traditional banking services and enjoying reduced rewards.
Sign the Petition
Together we can reform this proposed law, but we need your help. Take a stand to protect your financial security and your wallet. The EU will act on this before the end of the year, so take action now!
Sign the petition and we'll send a letter on your behalf telling the EU and your government not to pass harmful regulations -- because your card matters.
Thank you for taking action.