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05.20.15

EU Interchange Caps Will Go into Effect December 2015; More Regs Coming

Council_of_the_European_Union_logoThe European Council has published interchange fee regulations (IFR), which means the new regulation will enter into force in June and the caps on interchange will go into effect December 2015. In March, the European Parliament voted in favor of the IFR, which caps interchange at 30 basis points for credit cards and 20 basis points for debit cards. Member states have the option of imposing lower caps. Commercial cards, as defined by the regulation, are not subject to the caps. The industry will have an additional six months to comply with the provision to separate scheme management and processing.

Additional regulatory changes are ahead for Europe. During a presentation at APEX Europe yesterday, Monica Monaco, founder and managing director of regulatory consultancy TrustEUAffairs, said a vote on Second Payment Services Directive (PSD2) is expected in July—and after the regulation enters into force, the industry will have two years to comply. On May 7, the European Commission reached an informal agreement on the PSD2, but there may be additional changes to the text prior to the vote.

The disparate effective dates between IFR and PSD2 could cause some issues for the industry in Europe. For instance, under the current proposed text of PSD2, merchants are prohibited from surcharging for card payments on cards subject to the interchange caps. That means, until PSD2 goes into effect, some programs could be subject to interchange caps and surcharging at the same time.

Monaco noted that European policymakers are turning their attention to other areas of payments, including virtual currencies and e-commerce. On May 6, the European Commission announced its Digital Single Market initiative. The commission has committed to “creating the conditions for a vibrant digital economy and society by complementing the telecommunications regulatory environment, modernizing copyright rules, simplifying rules for consumers making online and digital purchases, enhancing cybersecurity and mainstreaming digitalization,” according to an announcement. A recent study by the European Parliament suggests the potential efficiency gain for Europe from a Digital Single Market would be €340 billion per year. In addition, the Third E-Money Directive also is on the horizon, although it’s unknown what the regulatory proposal will entail. Monaco suggested 3EMD could encompass virtual currencies.

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