Cards: Parliamentary Investigation on Merchant Fees
- Christine Lagarde, French Minister of the Economy, asked three Members of Parliament to investigate on Merchant Service Charges paid by merchants to financial institutions (acquirers). By June 2011, Françoise Branget (Doubs), Bernard Debré (Paris) and Richard Mallié (Bouches-du-Rhône) must have clarified the way these fees work, their composition and their level.
- According to Matignon Letter, merchants are confronted to difficulties with regard to the fees paid when they accept a bank card payment by their customers: lack in transparency regarding the fees applied by the service providers, abnormally high fees. [...] All these elements currently hinder the development of card payment, however modern, secure, efficient [and] praised by consumers”.
- Their mission will be to:
- improve transparency for all services provided for MSC,
- provide hints to reduce these fees on small amounts,
- identify the sectors in which they are particularly high, list the causes for these abnormalities and find how to lower then with the help of all partakers.
- Merchants’ lobbying seems to have succeeded in getting Bercy involved in these matters. The French Minister of the Economy has now officialised the conclusions of Richard Mallié’s parliamentary report on MSCs handed last May. This Member of the French Parliament also added a bill to cap fees and toalign them on card fraud rates (published every year by the Banque de France’s Observatoire de la Sécurité des Cartes de Paiement, OSCP). This proposal also intended to fix the underlying CIP, the CB interchange. This resulted last October in the French National Assembly voting merely a not-binding amendment. It states that MSCs must not abusively exceed the real costs supported by the payment service provider (the acquirer).
- This new investigation is doubling the CIP reform already initiated by the ACP, with which CB banks already committed to comply by the end of spring (see January 2011 Watch). Its scope is however larger because the targeted “payment organisations” also include the private card schemes, among which T&E (ex.: Diners, AmEx), that levy much higher fees than for the CB scheme.
- Nevertheless, the ministerial assignment remains wide-ranging:
- The mentioned “lack of transparency” of rates shows that CB acquirers still have some work left to comply with 2009 PSD as well as with acceptance unbundling of schemes (required by SEPA Cards Framework);
- The “abnormally high rates” noted in some sectors encompass many questions: does the Minster mean those sectors with the highest fraud levels? Non-secured distant selling? Charge-backs cause higher processing charges that are passed on to e-merchant everywhere in the world. Does the Minister mean sectors in which the average cart is particularly expensive? In which case, the amount of the merchant fee is boosted by the variable part of the CIP (based on the payment amount). All in all, the French interchange, created in the beginning of the 1990’s, may be living its last days.
- On a similar issue, let us mention the Minister’s recent speech (30 March) about the future of cheques in France. A study conducted by the CCSF (Comité Consultatif du Secteur Financer) shows that France remains ahead in terms of cheque use in Europe, in spite of a steady decrease. She declared that “this study comforts [her] in the idea that the suppression of cheques is not an option today. […] The extensive use of cheques –even if it did drop, or even disappeared, in other European countries– shows that all the other means of payment provided to the French population do not completely meet the services today rendered by the cheque”. She then asked for a report, to be handed next October, on the ways to diversify the means of payment. The CCSF suggests that improved credit transfers should be used.
- After the UK – where, last year, the UK Payments Association envisaged the erasure of cheque starting 2018 – Australia now considers the same project. On 29 March, its regulator, the Reserve Bank of Australia (RBA), required more innovation on the part of banks before making its decision on a possible decommission.
See January 2011 Watch