American Express Statement On EC's Card-based Transactions Regulation Proposals

(RTTNews) - In a response to the European Commission's draft proposals to regulate card-based payment transactions in the European Union, American Express Co. (AXP) said Wednesday that the proposals could affect the pricing and operations of the European payments industry over an extended period of time. Some of the changes would impact it directly; some, indirectly. Others may create new business opportunities.

"Unlike with Visa and MasterCard, no merchant must take American Express, and no bank must partner with us. When merchants choose to accept our card, and when banks choose to issue cards on our network, it is because of the value we deliver," American Express said.

American Express said that separate proposals would prohibit certain provisions in our merchant contracts and permit merchants to impose surcharges in all EU countries. It believes these proposals would not be beneficial to competition and are anti-consumer. In those European countries where surcharging is already permitted, most merchants have chosen not to add an extra fee at the point of sale.

Earlier today, the European Commission said it has approved a package in order to adapt EU payments market to the opportunities of the single market and to support the growth of the EU economy. The package includes a new payment Services Directive or "PSD2"; A proposal for regulation on interchange fees for card-based payment transactions.

Internal Market and Services Commissioner Michel Barnier said, "Today, the payment market in the EU is fragmented and expensive with a cost of more than 1% of EU GDP or €130 billion a year. These are costs our economy cannot afford. Our proposal will promote the digital single market by making internet payments cheaper and safer, both for retailers and consumers. And the proposed changes to interchange fees will remove an important barrier between national payment markets and finally put an end to the unjustified high level of these fees."

The Regulation on interchange fees, combined with the revised PSD, will introduce maximum levels of interchange fees for transactions based on consumer debit and credit cards and ban surcharges on these types of cards. Surcharges are the extra charge imposed by some merchants for the payment by card and are common notably for purchases of airline tickets. When interchange fees are capped for consumer cards, retailers' costs for card transactions will be substantially reduced and surcharging will no longer be justified, the Commission said.

According to the Commission, During a transition period of 22 months, caps on interchange fees for debit and credit cards will apply to cross-border transactions, i.e. when a consumer uses his card in another country, or when a retailer uses a bank in another country. Thereafter these caps will also apply to domestic transactions. The caps are set at 0.2% of the value of the transaction for debit cards and 0.3% for credit cards. These levels have already been accepted by competition authorities for a number of transactions with cards branded MasterCard, Visa and Cartes Bancaires. For the cards that are not subject to the caps (mainly commercial cards issued to businesses and three party schemes such as American Express or Diners), retailers will be able to surcharge for them or to refuse to accept them. In this way, the costs imposed by these expensive cards can be passed directly on to those who benefit from them rather than being borne by all consumers.