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

Photo: Getty
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Unite stewards urge members to back Owen Smith

In a letter to Unite members, the officials have called for a vote for the longshot candidate.

29 Unite officials have broken ranks and thrown their weight behind Owen Smith’s longshot bid for the Labour leadership in an open letter to their members.

The officials serve as stewards, conveners and negotiators in Britain’s aerospace and shipbuilding industries, and are believed in part to be driven by Jeremy Corbyn’s longstanding opposition to the nuclear deterrent and defence spending more generally.

In the letter to Unite members, who are believed to have been signed up in large numbers to vote in the Labour leadership race, the stewards highlight Smith’s support for extra funding in the NHS and his vision for an industrial strategy.

Corbyn was endorsed by Unite, Labour's largest affliated union and the largest trades union in the country, following votes by Unite's ruling executive committee and policy conference. 

Although few expect the intervention to have a decisive role in the Labour leadership, regarded as a formality for Corbyn, the opposition of Unite workers in these industries may prove significant in Len McCluskey’s bid to be re-elected as general secretary of Unite.

 

The full letter is below:

Britain needs a Labour Government to defend jobs, industry and skills and to promote strong trade unions. As convenors and shop stewards in the manufacturing, defence, aerospace and energy sectors we believe that Owen Smith is the best candidate to lead the Labour Party in opposition and in government.

Owen has made clear his support for the industries we work in. He has spelt out his vision for an industrial strategy which supports great British businesses: investing in infrastructure, research and development, skills and training. He has set out ways to back British industry with new procurement rules to protect jobs and contracts from being outsourced to the lowest bidder. He has demanded a seat at the table during the Brexit negotiations to defend trade union and workers’ rights. Defending manufacturing jobs threatened by Brexit must be at the forefront of the negotiations. He has called for the final deal to be put to the British people via a second referendum or at a general election.

But Owen has also talked about the issues which affect our families and our communities. Investing £60 billion extra over 5 years in the NHS funded through new taxes on the wealthiest. Building 300,000 new homes a year over 5 years, half of which should be social housing. Investing in Sure Start schemes by scrapping the charitable status of private schools. That’s why we are backing Owen.

The Labour Party is at a crossroads. We cannot ignore reality – we need to be radical but we also need to be credible – capable of winning the support of the British people. We need an effective Opposition and we need a Labour Government to put policies into practice that will defend our members’ and their families’ interests. That’s why we are backing Owen.

Steve Hibbert, Convenor Rolls Royce, Derby
Howard Turner, Senior Steward, Walter Frank & Sons Limited
Danny Coleman, Branch Secretary, GE Aviation, Wales
Karl Daly, Deputy Convenor, Rolls Royce, Derby
Nigel Stott, Convenor, BASSA, British Airways
John Brough, Works Convenor, Rolls Royce, Barnoldswick
John Bennett, Site Convenor, Babcock Marine, Devonport, Plymouth
Kevin Langford, Mechanical Convenor, Babcock, Devonport, Plymouth
John McAllister, Convenor, Vector Aerospace Helicopter Services
Garry Andrews, Works Convenor, Rolls Royce, Sunderland
Steve Froggatt, Deputy Convenor, Rolls Royce, Derby
Jim McGivern, Convenor, Rolls Royce, Derby
Alan Bird, Chairman & Senior Rep, Rolls Royce, Derby
Raymond Duguid, Convenor, Babcock, Rosyth
Steve Duke, Senior Staff Rep, Rolls Royce, Barnoldswick
Paul Welsh, Works Convenor, Brush Electrical Machines, Loughborough
Bob Holmes, Manual Convenor, BAE Systems, Warton, Lancs
Simon Hemmings, Staff Convenor, Rolls Royce, Derby
Mick Forbes, Works Convenor, GKN, Birmingham
Ian Bestwick, Chief Negotiator, Rolls Royce Submarines, Derby
Mark Barron, Senior Staff Rep, Pallion, Sunderland
Ian Hodgkison, Chief Negotiator, PCO, Rolls Royce
Joe O’Gorman, Convenor, BAE Systems, Maritime Services, Portsmouth
Azza Samms, Manual Workers Convenor, BAE Systems Submarines, Barrow
Dave Thompson, Staff Convenor, BAE Systems Submarines, Barrow
Tim Griffiths, Convenor, BAE Systems Submarines, Barrow
Paul Blake, Convenor, Princess Yachts, Plymouth
Steve Jones, Convenor, Rolls Royce, Bristol
Colin Gosling, Senior Rep, Siemens Traffic Solutions, Poole

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.