New EU regulations for interchange come into effect on December 9 2015. This is what merchants need to know.
** This post was last updated 23rd November 2015. It is updated as new information becomes available.**
The regulations, known formally as “Interchange fees for Consumer Card-Based Payments” (IFR), center around a cap on interchange rates for consumer cards across the EU.
There is a dual rationale behind the new regulations:
1. To simplify fee structures linked to card-based payments for businesses and consumers in the region.
2. To take a step toward the creation of an EU-wide payments market.
In practical terms, these changes mean a cap on interchange fees at 0.2% of the transaction value for Visa and MasterCard consumer debit cards and at 0.3% for Visa and MasterCard consumer credit cards, which will be introduced on December 9. The revisions will apply initially in the European Union.
Further information on regulation changes
Transaction Information details disclosed to merchants
In addition to the cap, as of December 9, all acquirers will be required to give information on the costs associated with each transaction. This includes the transaction reference, the costs charged to the merchant (including the split between the interchange and merchant service fees), and the value of the transaction and the settlement currency at the merchant’s account.
It is important to note that Adyen merchants will continue to see the same details as before, as Adyen has always operated on an Interchange+ pricing model that enables merchants to see the breakdown of costs at a transaction level.
June 2016: “Interchange fees for Consumer Card-Based Payments” next changes
On the 8th June 2016, the second part of the IFR regulations will come into effect. This will involve a number of other changes, including the following:
1) Card schemes will permit multiple brands to be processed on the same card at the Point-of-Sale. This means both merchants and consumers will have a choice of payment methods on a single card.
2) The “Honor all cards rule” no longer applies. This means it will not be obligatory for merchants to accept both credit and debit cards for any given brand, and they are free to choose to accept one but not the other.
3) Acquirers will be obliged to operate on an Interchange+ pricing structure rather than a blended pricing structure
4) Card schemes will have to clearly define their transaction processing and scheme management activities. The exact scope of these definitions will be announced by the European Central Bank in the first half of 2016.