The EU caps fees on Visa and MasterCard

A certain feeling of déjà vue.

With a certain feeling of déjà vue, the European Commission is again gunning for the major card issuers.

The EC has been trying to sort out alleged anti-competitive behaviour by MasterCard and its larger rival Visa since 2007. It is all to do with interchange fees – the charges paid by retailers on card transactions. Merchants argue that card companies unfairly overcharge them; in the other corner, the card companies contend that the fees are justified by the services they offer in return, such as easy payment collection.

The EC seems to be proposing that interchange fees be capped at 0.2 per cent for debit card payments and 0.3 per cent for credit cards. According to the EC, the proposed cap will cut total debit card fees across the EU to around €2.5bn from €4.8bn; credit card fees will fall to €3.5bn from an estimated €5.7bn once the cap is in place.

As consumers, I suspect we will barely notice any difference. MasterCard and Visa Europe have already capped their fees. I would wager – not huge sums but perhaps the loose change in my pocket – that we may expect to hear about the experience in Australia when the regulators capped interchange fees.

There was a well publicized survey in Australia – sponsored by MasterCard by the way – that concluded that once the government regulated interchange fees it was impossible to determine whether merchants passed on price reductions to customers.

I expect that we may also hear of gloomy predictions that a cap on interchange fees will inevitably lead to increased reliance on annual cardholder fees. The argument will be that card issuers, faced with reduced income from one source, will look for other ways to make good that loss. Expect also to hear that loyalty and rewards programmes may become a thing of the past due to the EU’s meddling.

The market barely batted an eyelid at todays news with MasterCard shares inching down by 1 per cent today. The issuers continue to continue to win new customers and expand their range of innovative services and products. For example, MasterCard has introduced mobile apps that are able to reduce expense accounting overheads and improve expense tracking for businesses. Major contract wins include one from the government of Canada that will convert its travel expense programme to MasterCard.

It is also among the biggest financial services sponsors of sports and the arts. If you watch any of the coverage of the Open Golf championship teeing off tomorrow, you will do well to avoid seeing the MasterCard logo as a constant presence on the screen.

Visa and MasterCard are two of the strongest performing financial services firms and are extremely well placed to enjoy further earnings and profits growth. Interchange fees will never be popular with the consumer press. They are however here to stay.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.