The June 2013 card scheme concessions on Cross Border Acquiring in the EU have created a new model for cross border acquiring. By default, they have become the EC Commission’s “Plan A” as a result of the delayed Cards Regulation sign off. The new rules now enable cross border acquirers with regulated operations outside a country to bid for domestic merchants using the 0.2% and 0.3% interchange, greatly undercutting current MSC’s. So, not surprisingly, merchant acquirers are setting up regulated operations outside their home country and a price war has begun. 

According to PSE Consulting, a leading European payment business and technology consulting organisation, in a recent paper, they wrote: “the concessions have generated the most disruptive challenge Europe’s acquirers have ever addressed. Even worse, they apply from the 1st January 2015, twelve to 30 months ahead of the application of the EC’s proposed CBA Regulation. High credit card interchange countries such as the UK, Germany, Portugal and Sweden are very vulnerable and are most threatened by major reductions in interchange revenues.”

In many EU markets, domestic acquiring is in turmoil and about to undergo significant change. EU wide acquirers are rapidly building defend and attack strategies. Domestic only acquirers are highly vulnerable and the international players have the greatest opportunities. 

What this means for merchants

For large merchants the potential annual savings from cuts in interchange and processing fee are significant, as the example in the figure below shows.

Potential multi-country interchange rate and fees costs before and after CBA changes|

Source & Copyright©2014 - PSE Consulting

Merchants are already asking their acquirers for substantial reductions from January 2015. 

---

CTMfile take: It will not be smooth sailing over the next couple of years, as the merchant acquirers and payment card issuers (some of whom are trying to delay the cut in IC rates as long as possible) adjust to the new CBA realities. Corporate treasury departments will have to push their merchant acquiring banks and service suppliers to maximise their savings. The only certainty is that the cost of accepting payment cards in the EU is going to decrease.