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How can one defend interchange fees of 8%, for example on the MasterCard World card handed out by a red UK bank to their customers, that merchants are forced to accept under the 'honour all cards' rule and which costs a fuel retailer 10p a litre when their gross margin is 5p a litre. The merchant then jacks up the price 1p a litre for everyone hoping that only 10% of customers come with a premium brand card. Who then is subsidising all the benefits on the account that Lewis Hamilton and other multimillionaires are paid to advertise? It is other consumers. This is the first sensible thing to come out of Europe for years: one lot of consumers stop unwittingly subsidising another lot of consumers. For sure there will be ructions when it becomes apparent who has been underwriting whom and for what amounts.

Don't panic, chaps, the Euro Retail Payments Board will soon be up and running.

Dear Charles - thank you, that is very clear and helpful. One comment: the EU is capping the interchange fees at 0.2% for debit card and 0.3% for credit card. Those fees are kept by Visa, Mastercard or whoever and are not passed to the Card Issuer, are they?

Aside from that, please could you clairfy a point about the 2% Acquirer fee. I thought that most of that got passed down to the Card Issuer, and that the fees for debit card were far lower than for credit card, because....

On a credit card the Card Issuer needs revenue to meet operational costs and interest cost between purchase date and the end of the interest-free period e.g. if I pay with Mastercard tomorrow 17th October, the Card Issuer pays out now but the transaction only hits the November 16th statement and can be paid without interest until December 16th. Only after that can the Issuer levy their 27.9% APR on the balance to the debit of my account.

If I buy something on the 15th of the month, though, it hits the statement at once and I only have a month of credit.

On average the cardholder gets six weeks.

If 27.9% is the APR the Issuer wants, then for six weeks of credit they should want 1.8%, plus something for operational costs (unless it is assumed that 27.9% APR is sufficient to cover them!).

On a debit card the Card Issuer fee should be correspondingly lower because the Issuer has to pay now and debits my account now: no interest carry.

Assuming the operational costs of both the Card Issuer and of the Acquirer are 0.2% regardless of whether it is a credit card or debit card, then the all-in should be 2.2% for credit card but only 0.4% for debit card.

The Acquirer gets 0.2% in both cases; the Card Issuer gets 2% for credit card but only 0.2% for debit card.

I'd be grateful for your views on this. The EU's move puzzles me because it caps a relatively small portion of the total costs in the case of credit cards.

thanks

Bob

Farewell to the Payments Council and their own Payments Roadmap, which will now be consigned to the dustbin of history. Possibly the result of appointing two successive CEOs who knew nothing at all about payments but who knew (not) how to tread the corridors of Whitehall: one from the Cabinet Office and the one before a former DG of the Association of Independent Financial Advisers and now DG of the Council of Mortgage Lenders. Neither of them ever seen an MT103 in their life, hence repeated directional as well as communicational errors.

Potential IP infringement at work here: "The reforms we are announcing today will encourage innovation, ensuring that real benefits are passed onto each and every user of financial services." That phrase is copyrighted in the 2004 SEPA Roadmap.

So the world was holding its breath for another Roadmap, just as accurate and immediate as the SEPA Roadmap (2004). ISO20022 XML - global? A standard? Methinks the document author he needeth to lie him down.

The activities listed are surely all legal and respectable in such a liberal environment as Finland.

Is there no value in anonymity, for any types of transaction at all? Well I guess your foreign business trips may be missing the fun factor... and Helsinki would be a suitable destination in that sense (EBADay 2014?)

In the ACT "Cash Management at the leading edge" training in London today the presenter said SEPA CT had only got 30% of the volumes and SEPA DD only 2%, and it all had to go over by February. Is this really true? If so and EBA is all about clearing euros, there isn't much sign of this emergency and clearing the decks for action

This could be an interesting story if we were told who the banks were. I heard that eight major French banks were going to use STET, and several Spanish banks were planning on using Iberpay. This is all highly confidential of course.