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Document 52014AB0010
Opinion of the European Central Bank of 5 February 2014 on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions (CON/2014/10)
Opinion of the European Central Bank of 5 February 2014 on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions (CON/2014/10)
Opinion of the European Central Bank of 5 February 2014 on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions (CON/2014/10)
OJ C 193, 24.6.2014, p. 2–18
(BG, ES, CS, DA, DE, ET, EL, EN, FR, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)
24.6.2014 |
EN |
Official Journal of the European Union |
C 193/2 |
OPINION OF THE EUROPEAN CENTRAL BANK
of 5 February 2014
on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions
(CON/2014/10)
2014/C 193/02
Introduction and legal basis
On 31 October 2013, the European Central Bank (ECB) received a request from the Council for an opinion on a proposal for a regulation of the European Parliament and of the Council on interchange fees for card-based payment transactions (1) (hereinafter the ‘proposed regulation’).
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union since the proposed regulation contains provisions affecting the tasks of the European System of Central Banks (ESCB) to promote the smooth operation of payment systems and to contribute to the smooth conduct of policies relating to the stability of the financial system, as referred to in the fourth indent of Article 127(2), and Article 127(5) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.
General observations
1. |
The proposed regulation lays down uniform technical and business requirements for payment card transactions carried out within the European Union where both the payer’s and the payee’s payment service provider are established in the Union. The proposed regulation has two parts. The first part sets a cap on interchange fees (2) for consumer debit card transactions of no more than 0,20 % of the transaction value, and a cap for consumer credit card transactions of no more than 0,30 % of the transaction value, which will apply to domestic or cross-border (3) transactions after different transitional periods (4). Transactions with commercial cards, cards issued by three-party card schemes, as well as cash withdrawals at automatic teller machines are exempted from the requirements of the first part of the proposed regulation. |
2. |
The second part of the proposed regulation lays down business rules and other technical requirements that will apply to all categories of card-based payment transactions. The most significant are a separation of the payment card schemes and the processing entities (5), changes in the application of the ‘Honour All Cards Rule’ (6) and a prohibition on rules hindering or preventing co-badging (7). There is also a new rule requiring licences delivered by payment card schemes for issuing or acquiring purposes to cover the entire Union territory, as well as rules to increase transparency in respect of charges for merchants (‘unblending’), and to prohibit ‘no-steering measures’ in licensing agreements (8). There are also new rules to improve the transparency of fee structures, such as prohibiting any rule that prevents merchants from disclosing to their customers the fees they pay to acquirers, and a requirement for acquiring payment service providers to provide, at a minimum, monthly statements of fees they charge to merchants, specifying the fees paid by merchants every month for each category of card and each individual brand for which the acquirer provides acquiring services. |
3. |
The ECB welcomes the fact that the proposed regulation lays down common Union-wide rules on interchange fees and also uniform business rules and technical requirements for card-based payment transactions. The proposals are generally in line with existing Eurosystem positions. Payment cards are the most widely used electronic payment instruments for retail purchases and thus represent a large share of the payment transactions in the Union. Despite this, however, interchange fees are currently largely unregulated and, hence, very divergent across Member States. The introduction of common rules should contribute to completing the internal market for payments and support the establishment of a Single Euro Payments Area (SEPA). While the new rules have a strong competition-related aspect, they should also reduce market fragmentation and create a level playing field, which will make it easier for existing players to compete and for new providers to enter the market for card payments, thus leading to increased efficiency and a greater use of electronic payment instruments overall. |
Specific observations
1. Defined terms
The definitions in the proposed regulation (9) have been aligned to some extent, but not fully, with those of the proposal for a second Payment Services Directive (hereinafter the ‘proposed PSD2’) (10) and Regulation (EU) No 260/2012 of the European Parliament and of the Council (11). There are benefits to having similar definitions of concepts that appear in closely-related Union legal acts, to avoid misperceptions and to facilitate citizens’ understanding of the legal framework. Therefore, the ECB considers that the definitions of a number of key terms such as that of ‘payment order’, ‘payment service provider’ and ‘payment transaction’ should be further aligned with those in the proposed PSD2. Furthermore, the proposed definititions of ‘card-based payment transaction’ and ‘payment card transaction’ are very similar. The ECB would therefore suggest merging them into one definition. The Annex to this opinion provides a number of further technical comments on the definitions.
2. Other provisions
2.1. |
The ECB welcomes the fact that there is increased clarity regarding interchange fees. If, however, the caps on cross-border interchange fees are introduced before the caps on national interchange fees, small national card acquirers could be put at a disadvantage, because they will not be able to compete with foreign acquirers that benefit from the resulting lower cross-border interchange fees. The ECB would therefore suggest introducing these caps simultaneously. |
2.2. |
The ECB supports the proposal that the choice of brand in cases of more than one brand on a card (co-branding) should be made at the point of sale (12). At the same time, payers may have an incentive to choose card brands that provide them with additional benefits such as reward programmes, which might consequently lead to an increase in the use of expensive card brands. In this regard, the ECB suggests that the choice of a specific brand should be agreed upon jointly by the cardholder and the merchant at the point of sale. |
2.3. |
While the ECB welcomes the fact that there is a prohibition on rules forcing merchants to accept all cards of a specific brand, the ECB is concerned by the derogation that states that merchants should be obliged to accept other payment instruments of the same brand and/or category that are subject to the same regulated interchange fee (13). The decision on whether to accept cards, as well as the particular brands or card products which may be accepted under a certain scheme, should be a commercial decision by the merchant. |
2.4. |
The ECB further suggests clarifying that payment card schemes should not discriminate against processing entities by implementing business rules that unduly restrict interoperability between processing entities. |
2.5. |
In addition, payment card schemes may need some additional time to adapt to the new requirements. To this end, a transitional period for the separation requirement (14) could be considered. |
2.6. |
For efficiency reasons, the ECB would suggest one single competent authority being responsible for ensuring compliance with the regulation, however being aware that this might prove difficult in practice due to diverging national set ups. |
Where the ECB recommends that the proposed regulation is amended, specific drafting proposals are set out in the Annex accompanied by explanatory text to this effect.
Done at Frankfurt am Main, 5 February 2014.
The President of the ECB
Mario DRAGHI
(1) COM(2013) 550 final/2.
(2) See Chapters II and III of the proposed regulation. Inter-change fees are inter-bank fees that usually apply between the card-acquiring payment service providers and the card-issuing payment service providers belonging to a certain card scheme. They are the main part of the fees that acquiring payment service providers charge to merchants for every card transaction.
(3) Cross-border transactions are when consumers use their payment cards in another Member State, or when a retailer uses an acquiring payment service provider in another Member State.
(4) The caps for cross-border transactions will enter into effect two months from the entry into force of the regulation. Two years after the entry into force of the regulation, these caps will also apply to domestic transactions.
(5) Payment card schemes and entities processing card-based payments should be independent from each other in terms of legal form, organisation and decision making.
(6) This rule pertains to card schemes or payment service providers that require merchants to accept all cards of a certain brand, meaning that merchants cannot limit acceptance to only a certain kind of card. Article 10 of the proposed regulation would allow merchants to accept only one card category of a particular brand by prohibiting the payment service provider or card scheme from requiring merchants to accept more or all categories of the same brand. In addition, the proposed regulation introduces a requirement that prevents merchants from discriminating between cards that are subject to the same regulated interchange fee, i.e. if merchants accept one debit card brand, they should also accept debit cards from all other brands.
(7) In other words, placing two or more brands on a card-based payment instrument.
(8) Merchants should not be prevented by their payment service provider or card scheme from steering consumers to the use of a preferred payment instrument, or from informing consumers about interchange fees or merchant services charges.
(9) See Article 2 of the proposed regulation.
(10) Proposal for a Directive of the European Parliament and of the Council of on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU and 2009/110/EC and repealing Directive 2007/64/EC (COM(2013) 547 final).
(11) Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, p. 22).
(12) See Article 8(5) of the proposed regulation.
(13) Article 10(1) and recital 29 of the proposed regulation.
(14) See Article 7 of the proposed regulation.
ANNEX
Drafting proposals
Text proposed by the European Commission |
Amendments proposed by the ECB (1) |
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Amendment 1 |
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Recitals 15 to 17 |
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Explanation The proposed 22 months between the introduction of the caps on cross-border interchange fees and on national interchange fees, could put small national card acquirers at a disadvantage since they would not be able to compete with foreign acquirers benefiting from the lower cross-border interchange fees. Therefore, a common date for the introduction of the caps on interchange fees would be preferred; however the ECB remains neutral on the proposed timeline. |
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Amendment 2 |
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Recital 24 |
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Explanation It is suggested to add this wording to clarify the context. |
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Amendment 3 |
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Recital 29 |
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Explanation Merchants should be able to take commercial decisions themselves on which cards, schemes, brands or products to accept. Introducing mandatory acceptance of cards that are subject to the same regulated interchange fee seems to be unnecessarily broad. |
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Amendment 4 |
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Article 2(1) |
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Explanation This article requires amendment to capture some additional features of acquiring. The drafting suggestion is in line with the Eurosystem’s proposed definition of ‘acquiring of payment transactions’ in its opinion on the proposed PSD2. |
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Amendment 5 |
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Article 2(2) |
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Explanation Amended to capture some additional features of issuing. The drafting suggestion is in line with the Eurosystem’s proposed definition of ‘issuing of payment instruments’ in its opinion on the proposed PSD2. |
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Amendment 6 |
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Article 2(4) |
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Explanation It cannot be taken for granted that a debit card will be debited within 48 hours. The separation between debit and credit cards should therefore relate to the immediate debiting of the account (debit card) and debiting on pre-agreed dates (credit card). Moreover, the definition of debit card should also deviate from the definition of credit card (see below) as regards the aspect of benefits for the payee, so as to provide a non-arbitrary reasoning for the proposed difference of the respective interchange fee caps. |
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Amendment 7 |
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Article 2(5) |
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Explanation See explanation of Amendment 6. |
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Amendment 8 |
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Article 2(7) |
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Explanation The Commission’s proposed definition of a ‘card based payment transaction’ is slightly wider than the definition of a ‘payment card transaction’ covering also transactions made without a physical card. Considering the rapid development in the area of cards and the increasing variety of payment solutions using the cards infrastructure, the ECB suggests merging the two definitions. |
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Amendment 9 |
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Article 2(8) |
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Explanation It is suggested that the wording of this definition can be simplified as indicated in the amendment above. |
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Amendment 10 |
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Article 2(9) |
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Explanation It is suggested that the wording of this definition can be simplified by referring to the concepts of issuer and acquirer. |
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Amendment 11 |
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Article 2(10) |
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Explanation It is suggested not to limit the definition of the merchant service charge to the items listed. |
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Amendment 12 |
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Article 2(13) |
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Explanation Amended to incorporate the element of initiation; references to the Union and the Member States should be deleted as they are not necessary. |
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Amendment 13 |
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Article 2(14) |
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Explanation It is suggested not to distinguish between three-party and four-party card schemes on the basis of the provision of issuing and acquiring services. |
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Amendment 14 |
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Article 2(15) |
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Explanation See explanation of Amendment 13. |
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Amendment 15 |
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Article 2(16) |
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Explanation This definition should be aligned with the proposed PSD 2. |
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Amendment 16 |
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Article 2(17) |
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Explanation This definition should be aligned with the drafting suggestion for ‘card based payment transaction’ in Amendment 8. |
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Amendment 17 |
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Article 2(18) |
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Explanation It is suggested to incorporate the element of remote access within this defined term. |
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Amendment 18 |
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Article 2(19) |
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Explanation Payment orders for card payments could also be initiated by the payee. Additionally, the amendment aligns the definition with the proposed PSD 2. |
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Amendment 19 |
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Article 2(20) |
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Explanation The definition is very similar to the definition of ‘card based payment transaction’. The two definitions could usefully be merged. |
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Amendment 20 |
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Article 2(21) |
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Explanation To be aligned with the proposed PSD2. |
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Amendment 21 |
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Article 2(23) |
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Explanation To be aligned with the proposed PSD2. |
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Amendment 22 |
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Article 2(24) |
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Explanation Amended to further clarify what payment transaction processing services provided by payment service providers entail. |
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Amendment 23 |
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Article 2(25) |
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Explanation Amended to emphasise the technical nature, i.e. involving IT processing of the payment services being provided. |
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Amendment 24 |
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Articles 3 and 4 |
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‘Article 3 Interchange fees for cross-border consumer debit or credit card transactions
Article 4 Interchange fees for all consumer debit or credit card transactions
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‘Article 3 Interchange fees for cross-border consumer debit or credit card transactions
Article 4 Interchange fees for all consumer debit or credit card transactions
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Explanation See explanation of Amendment 1. |
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Amendment 25 |
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Article 7(3) and Article 7(5) and (6) (new) (3) |
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[…]’ |
[…]
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An amendment to paragraph 3 is suggested to increase the clarity of the current wording, which, as it currently stands, could be interpreted in a way that would not leave room for country risk management at different stages of the processing, i.e. at authorisation. A new paragraph 5 is suggested to avoid the possibility of payment card schemes discriminating against processing entities by implementing business rules that unduly restrict interoperability between processing entities. Finally, a new paragraph 6 is suggested. The payment industry might need some additional time to implement the separation of the scheme and the processing infrastructure. It is therefore suggested that this article should not apply until two years after the Regulation has entered into force. |
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Amendment 26 |
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Article 8(3) and (5) |
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[…]
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[…]
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For oversight purposes, central banks require card schemes to report card fraud statistics. It would be a substantial burden if reporting requirements were modified to cover a larger number of providers. Therefore, as a solution to this, it is proposed to impose reporting requirements that will provide information that is actually needed by regulators, supervisory authorities or central banks. The choice of a specific brand should be jointly agreed upon by the cardholder (i.e. the payer) and the merchant (payee). If the choice lies solely with the payer, there is a risk that the payer will choose an expensive brand, which, while providing him with additional benefits, would lead to higher costs for the merchant which, ultimately, could lead to higher prices for all the merchant’s customers. |
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Amendment 27 |
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Article 10(1) |
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Explanation The decision on whether to accept cards, as well as which schemes, brands or products to accept, or which cards under a certain scheme to accept, should be a commercial decision taken by the merchant. Allowing schemes and providers to apply rules forcing upon payees the mandatory acceptance of cards which are subject to the same regulated interchange fee, seems to be unnecessarily broad. The additional amendments aim to simplify the requirements set out in this paragraph. According to recital 29, the goal of this paragraph is to remove the ‘Honour All Products’ element of the ‘Honour All Cards’ rule. The conditions on issuers are not necessary in order to reach this objective. |
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Amendment 28 |
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Article 10(5) new |
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No text |
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Explanation Merchants should be allowed not to accept cards with lower security features, e.g. cards without a micro-chip, since payment where such cards were used would not be guaranteed, thus exposing them to greater financial risk. |
(1) Bold in the body of the text indicates where the ECB proposes inserting new text. Strikethrough in the body of the text indicates where the ECB proposes deleting text.
(2) COM(2013) 547/3.
(3) Please note that the references in this opinion mirror the paragraph numbering scheme in COM(2013) final 550/2.