Europe’s largest retailers and leading online retail giants have come together to voice a pressing concern to the European Commission: the high fees levied by Visa and Mastercard are becoming a significant barrier to competition within the region. These fees don’t just pinch the wallets of retailers; they create an uneven playing field, making it harder for smaller rivals to thrive.
Imagine walking into a store and seeing prices rise beyond your budget, not because of a product shortage, but due to the unseen fees charging at the checkout courtesy of major credit card companies. That’s the reality many retailers are facing, as they contend with what they believe are exorbitant transaction costs imposed by these two dominant players in the payment card market. According to reports, Visa and Mastercard manage around two-thirds of card payments in the eurozone, effectively holding a powerful grip over how businesses transact.
Retailers are expressing frustration over the lack of clarity surrounding these fees. They’ve described the pricing structure as overly complex and opaque, making it difficult for merchants to understand what they’re paying for and why. In a letter dated May 13, which was shared with Reuters, these businesses stated, “International Card Schemes (ICS) have been able to increase their fees without competitive challenge or regulatory scrutiny.” This sentiment echoes a growing unease among European businesses as they struggle to keep pace with the rising costs.
A report from The Brattle Group highlighted an alarming trend: fees for these international card schemes have surged by a cumulative 33.9% from 2018 to 2022—an average increase of 7.6% annually. Despite this hike, retailers have not seen any notable improvements in service that would justify the escalating costs. It raises an important question: where is all that extra money going, if not towards enhancing the merchant or consumer experience?
The situation has prompted a broader conversation about the future of payment processing in Europe. In response to these escalating fees and the dominance of U.S. providers, the European Union is exploring alternatives, such as introducing a digital euro to foster independence. However, the slow pace of legislative progress on this digital currency has left many policymakers and businesses feeling frustrated and eager for quicker solutions.
Retailers are not standing idle; they are actively pushing for action. Signatories to the recent letter addressed to key officials within the Commission, including antitrust chief Teresa Ribera and financial services commissioner Maria Luís Albuquerque, are notable names in the industry, such as Aldi, Amazon, and H&M. These entities are calling for intervention under EU antitrust rules, seeking to impose regulations that would cap interchange fees and enhance transparency in how these fees are structured. They want a level playing field, where both large and small businesses can compete fairly.
The conversation around payment fees is not just about money—it’s about the future of commerce in Europe. For every small business that feels the squeeze of rising fees, there’s a larger conversation about what it means to create an equitable marketplace where innovation can thrive and consumers have choices. It’s a complex issue, and as discussions evolve, the hope among retailers is that their voices will lead to meaningful change.
Image Source: The Image Party / Shutterstock
