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Proving that politicians should stay out of industries they do not understand and further backing up the law of unintended consequences, Europe’s politicians are currently considering final changes in the proposed Interchange Fee Regulation.
One of these changes could allow three-party cards to gain a greater share of Europe’s
Retailers concerned about 3 party scheme interchange fee loophole
market. This risks making the most expensive types of payment card into ‘must-take’ cards for merchants and so increase final prices for consumers.
The proposed text change would allow member states to completely exempt three-party schemes from all caps up to a 5% market share, even if they issue cards through an agent.[1] The loophole could result in a five-fold increase in expensive 3-party card issuance in Europe. As, in many member states, merchants may not be permitted to surcharge these cards, they would be compelled to accept them, or lose sales.
“Three-party schemes, like American Express, already predominate in sectors like hotels and airlines and are developing fast in other sectors. Yet the proposed amendment would create a loophole that would allow banks to propose these cards to customers, since they will be more lucrative for banks than other card types,” comments Christian Verschueren, Director-General, EuroCommerce.
“Many more merchants and retailers would then be induced to accept them. This is an unacceptable backward step that would diminish the benefits of this important legislation.”
“We are already seeing a worrying trend in some member states where banks are sending consumers ‘free’ American Express cards which they have not requested,” continues Verschueren.
“The ‘gifts and ‘rewards’ linked to these cards are hugely attractive for users, but are in fact paid for by all consumers, whether they use American Express, any other card or no card at all. We therefore call upon the Council and Parliament to delete this option from the final text. To the contrary, we call for all three-party schemes to be fully included in the regulatory caps.”
[1] Under Article 1 of the original Commission text, three-party schemes are subject to caps if they operate through an agent or co-branding partner.
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