European Union competition policy and payment systems: A review of recent developments

Following the European Commission retail banking sector inquiry, the area of payments — and multilateral interchange fees (MIFs) — became a priority. Also, the Single Euro Payments Area (SEPA) initiative needed to be monitored from a competition perspective. Importantly, the recent (temporary) MasterCard undertakings included a MIF level meeting the exemption criteria of Article 81(3). The tourist test methodology used indicates the MIF level for which merchants are indifferent in accepting cash or cards, resulting in cardholders' choosing payment instruments efficiently, while ensuring that retailers are not faced with disproportionate fees. Transparency measures, crucial for consumers and merchants to make better informed choices about the payment means they use and accept, have also been adopted. Although the MasterCard decision was also the basis for the analysis, the recent joint statement of the European Central Bank (ECB) and the European Commission expressed the view that a general per transaction MIF does not seem necessary for the long term, providing clarity for SEPA Direct Debit to be launched on 1st November, 2009. Unlike card payments, direct debits are typically made on a regular basis, and direct incentivisation of their use is possible and already practised. In addition, many member states have cheap and widely used direct debit systems functioning very efficiently without MIFs per transaction. Hence, the economic tools and the applicability of the tourist test methodology need to be fine tuned and adapted to the payment markets realities: significant objective evidence would need to be provided, and each case assessed individually.