Monday,4 July 2022
Euro-Ibero-American space for dialogue on social, professional and academic innovation
HomeInformationThe reduction of interchange fee´s in payment cards does not benefit consumers
According to ADICAE´s study

The reduction of interchange fee´s in payment cards does not benefit consumers


The study by ADICAE, the Spanish Banks, Saving Banks and Insurance Users Association shows how the agreement signed in Spain in 2005 between the Ministry of Industry and the three payment systems (Servired, 4B and Euro 6000) to reduce the fees merchants have to pay when accepting payment by payment cards has resulted in the transmission of these costs to consumers in the form of bank fees, bringing no benefits for users, but additional damages.

ADICAE has called on the European Commission to refrain from further reductions of interchange fees if the measure is not accompanied by a regulation on the costs and in-terests consumers pay for using payment cards.

ADICAE grounds this request on a study which analyses the Spanish experience that started in 2005. According to ADICAE, official statistics prove that the interchange reduction agreement has caused serious damage to consumers.

The study was presented to socialist and centre-right members of the European Parliament as well as to the European Commission. In addition it will be presented to the Fi-nancial Services Users Group and the Consumers Consultative Group. The document examines the development from 2005 to 2012 of Interchange Fees and Merchant Service Charges, the costs consumers had to bear in the form of cardholder fees and interest rates when using credit and debit cards, and other related economic factors.

Further to this economic, legal and social study, ADICAE concludes that the agreement, besides being contrary to Article 1 of the Spanish Competition Law, merchants’ breach of the agreement is contrary to the European Treaty. Articles 101 and 102 of the EU Treaty declare competition infringements inapplicable if they benefit consumers – who in the case in hand have been harmed. These Spanish effects could be extended to Europe if the Commission should reproduce the Spanish situation without any taking efficient com-plementary measures.

ADICAE is an officially recognized consumers association of renown among European institutions and one of the ten largest in Europe (see mapping of Non-Profit Entities in the EU), with about 150,000 members. ADICAE’s study has been complemented and con-trasted with a survey of 3561 consumers.

The majority of interviewees do not know what interchange fees and merchant service charges are: 54% admit they are unaware of them, and only 16.2% give the correct an-swer from a choice of three. But the vast majority believes that if fees drop, merchants will not reduce prices. Nearly 90% of respondents find that the main advantage of cards is to pay without carrying cash (89.2%), whereas the advantage of obtaining discounts is only mentioned by less than 16%.

In addition to the petition submitted to the European Commission regarding its plans to reduce interchange fees and merchant service charges, ADICAE concludes that the disastrous Spanish experience should encourage further reductions of all costs and prices paid by consumers to large merchants through regulation and controls; encourage consumers’ participation in observatories, forums and other social institutions at national or European level; stimulate the reduction of all fees and interest rates that hinder the development of payment cards; promote private consumption, and therefore economic growth and employment, through financial education campaigns in favour of electronic payments that help to ensure the best interests and rights for consumers; discourage the underground economy through the promotion by the government of a more intensive use of electronic payments, or even raising the penalties on the use of cash for fraud and corruption.

Of interest