Study: Global trends in interchange regulation

Nov. 21, 2013

Around the world, legislators and regulators are taking aim at interchange fees, trying to reduce or cap the amount that FIs and global card networks can charge merchants for accepting payment card transactions.

A new report from Mercator Advisory Group, "Global Regulatory Trends: Interchange Regulation," examines the current state of international interchange regulation. 

The study by Mercator found scant evidence, even from the countries with the longest history with interchange caps, that regulation achieves its intended purpose — namely to increase savings for both consumers and merchants.

Nevertheless, regulatory authorities are imposing or proposing debit and credit interchange rate caps, placing interchange revenue streams globally under threat, according to the report.

Judging by empirical evidence from Spain and Australia — two early adopters of fee cap regulation — interchange limits proposed by the European Commission in July would have a considerable impact on all participating countries across the region, and would set the domestic industry back a number of years, as happened following domestic regulation in Spain and Australia.

"From creating standards around data privacy to classifying new payment players, European authorities have demonstrated in the past a strong desire and willingness to introduce broad-reaching payments regulation," said Tristan Hugo-Webb, associate director for the international advisory service at Mercator Advisory Group and the primary author of the report.

"While interchange regulation in Europe prior to 2013 was largely done at the domestic level, new proposals point to a pan-European approach to interchange fee regulation — however, not exclusively."

Highlights of the report include:

  • a summary history of interchange regulation around the world;
  • global and Europe-specific payment card use trends;
  • an in-depth examination of the European Commission’s 2013 proposal to cap debit and credit card transactions across Europe; and
  • a review of evidence from Spain and Australia, early adopters of interchange regulation, that shows the effects of regulation on the local payments industry.

Below is one of 10 exhibits in the 23-page report:

effects of international fee regulation

Read more about trends and statistics.

Topics: Regulatory Issues

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