The previous item on New EC card regulation, see, showed that there are significant opportunities for retailers in the EU to cut the cost of collecting card payments as the impact of the new Cross Border Acquiring rules from the EC take effect even before they are settled and come into affect in 2016. 

Visa Europe have adhered to the interchange Concessions announced in mid 2013 based on rates of 0.2% for debit and 0.3% for credit, which are planned to apply from 1st January 2015. MasterCard are expected to announce a similar deal, after losing their EU antitrust case. The interim Visa’s Concession period is expected to last until early/mid 2016 before the EC interchange caps come into force.  One of the biggest changes for merchant acquirers is that in order to offer Visa Concessionary rates in the home markets, they have to set up operations in another country.

The Visa interim concessions are also impacting selected local market interchange rates. Recent changes include:

• UK: Visa debit card interchange is now 0.2% + 1p with a maximum of 50p
• Germany: Visa credit card interchange has been reduced from 1.4% to 0.4%
• regulatory pressure and initiatives have also reduced interchange fees in Hungary, Poland and the Netherlands.

Interim period opportunities

The Visa Concessions and these developments present larger European retailers with major opportunities for savings and cost reduction. Corporates (particularly multi country) should:

• understand/have a feel for what are current MSC and interchange rates in each country of operation.
• approach their merchant acquirer(s) and ask for a new deal as result of the Visa Concessions and/or lower local market interchange.
• if not offered reduced fees, go out to RFI/RFP and select a new acquirer.

However, when evaluating the new interim concession acquirer deals, retailers need to understand the following key issues:

• Contracts: is a new contract needed? Can we exit our current contract? Can we change in acquirers?
• New Cross Border Contracts:  Retailers will have to contract with a new cross border acquiring entity their current acquirer will have set up outside the country to be able to offer Cross Border rates.
• Interchange ++ Billing:  A new method of billing known as Interchange++ will be used which is more complex to understand and manage. This is a totally unbundled tariff with separate pass through costs for interchange and card scheme costs, plus an acquiring fee. 
• FX Costs and Settlement:  Currency conversion could be an issue with some of the cross border service providers, and settlement which could be T+2 in some circumstances.

To understand more about the opportunities for the new cost savings in payment card collection in Europe, and the new and emerging technologies in merchant acquiring, it might be useful to attend the 4th Annual PSE Consulting Acquiring Conference in London on the 27th November 2014, at the Double Tree Hotel, Tower Hill, London.