If the recent article published on the Pymnts web site is accepted then it seems that Visa may be considering an exit strategy from Hungary in the face of substantial, and continuing, market share loss to MasterCard.

According to the article, and cross referenced pieces, Visa’s problems stem from a commitment made to the EC to reduce (debit card) interchange fee rates to a blended average 20 basis points, not only for intra regional, cross border transactions but also in local country domestic markets where Visa have set the interchange fee rates.

Quite why Visa entered into such a commitment with the EC when the EC competition authorities would usually subordinate their views and decisions to local country regulators as regards domestic traffic I don’t know, but parking that to one side for now it is worth considering what might happen if MasterCard have a (virtual) country monopoly in Hungary.

The article author suggests there is a potential for interchange fees to rise and, of course, this has to be a possibility.  However, I think that market forces and payment alternatives would keep a check on rising interchange fee rates irrespective of any local country regulatory scrutiny that might be expected if rate rises were to occur.  I think the more potentially damaging outcome is that MasterCard might come to look at Hungary as a low priority in terms of market development, investment and progressive evolution, preferring to concentrate resource and effort on countries where there is a higher business imperative for them.

There has been a lot of talk about the unintended consequences of interchange fee regulatory decisions.  From a competition perspective it has to be a bad outcome if one of the international card schemes is put in such a competitively disadvantageous position that they seriously have to question their continued presence in a country market.