Europe's banks have been told that they will have to ditch interchange fees on direct debit transactions by 2012 under EU antitrust rules.
For years EU banks have struggled with the multilateral interchange fee (MIF)issue on payment card schemes and now, for a couple of years with the pan Eu direct debit (PEDD) fee as well. Why not go for a bilateral interchange fee (BIF) set-up instead? The
issuers and acquirers of cards in Sweden adopted a business model with a BIF already in 1995. More than 1,5 billion transactions on payment cards are annually cleared on this BIF based business model that also has received formal approval from the Swedish
Competition Authority since it doers not violate the competition legislation. The EU banks could well launch the PEDD conditioned that transactions can only take place if and when payer and payee bank have a BIF agreement in place. Set-up of such agreements
incl. negotiations can be made via the internet where the payee bank would send proposals to potential payer banks, who can respond by declining and making counter proposals. An arbitration panel could be set up to resolve disagreements if the parties are
willing to submit themselves to that. The EU Commission and the ECB get the launch of the PEDD, banks get paid according to requests and no transactions take place if payer and payee bank see no point in agreening on a BIF! A draw back would be that not all
banks would participate in the PEDD but the PEDD would live on its own merits and if the ECB and EU Commission would like to boost the use of the PEDD they could allow a MIF if they feel that the uptake is too small!
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