The EU says Mastercard is overcharging stores

Updated
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The EU has announced: "We currently suspect Mastercard is artificially raising the costs of card payments." The statement came from the Competition Commissioner, who added that the fees were damaging to retailers and shoppers.

The announcement concerned the 'interchange fee' - which shops pay to the company that issues the payment card, in order to process bank payments. The EU pointed out in March this year that: "Today only competition rules limit the fees set by banks and payment card schemes, which are hidden from the consumer and neither retailers nor consumers can influence. When retailers pass these costs on to consumers this can of course lead to inflated prices."

This is just the latest in a host of actions the EU has taken against interchange fees. In December this year, as a result of the EU's intervention, there will be a cap on interchange fees for cards issued and used in Europe (to a maximum of 0.2% for debit cards and 0.3% for credit cards). The new rules won't cover the fees charged on cards from outside Europe.
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Across borders

The EU's concerns now relate to charges across borders within the EU - and charges made to shops receiving payments from cards issued outside the EU. It highlighted that the fees charged when a Chinese tourist uses his card to pay his restaurant bill in Brussels are up to five times higher than those paid when a consumer uses a card issued in Europe.

The EU is saying that these fees are artificially high - which it suggests breaks competition rules. This is a preliminary finding, and Mastercard now has an opportunity to respond. According to the BBC, Mastercard said that it was "working with the European Commission on the issue" and was preparing a formal response. It added: "Throughout this procedure we have kept the needs of both consumers and merchants in mind."

The EU is conducting a separate investigation into Visa's fees.

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