Interchange Fees - It'll all end in Tiers!

If MasterCard’s analysis, published in their Insights paper 1Q2007, of the effects and outcomes of the RBA (Reserve Bank of Australia) intervention into Interchange Fees (ICFs) back in 2002 is to be taken at face value then the prospects for European consumers using payment cards, if MasterCard Europe’s final appeal of the 2007 EC decision on ICFs fails, appear bleak.

Now you would probably expect that MasterCard should find that all of the intended outcomes expected by the RBA when they intervened to regulate ICFs in the Australian market would have failed but when you do look at their findings, and consider them against the commercial world we live in, the findings can hardly be viewed as a surprise.

That cardholder costs have risen disproportionately to any savings consumers might have benefitted from at POS, that building a business case for industry developments would be that bit harder, that smaller players in the industry would feel extreme pressure on their margins, that non regulated (3 Party) schemes would gain advantage, well, come on, it’s not a big stretch is it.

So, if the MCE final appeal fails and, as is most likely, local country regulators pick up the baton, then in a few years time European consumers can expect to see their costs of payment card usage increase, and if any of the benefit from lower MSCs should somehow creep through into consumer savings at POS it’s difficult to see how that could be transparent and, I would suggest, will be imperceptible to consumers.

I wonder, though, when will the banks begin to look at their payments pricing on a wider scale.  So many bank customers see it as a right that they should enjoy free access to cash,  perhaps not realising that it costs the banking & finance industry billions to keep that cash moving.