If you’re a European merchant acquirer, then I should think you are.
In case you've not been following the conversations around the new regulations, here’s what we know already:
- The EU Commission continues its attack on reducing interchange rates and changing the cards business model across Europe
- There are plans to introduce new card regulations that will reduce interchange rates both for domestic and cross border transactions, and change other aspects of cards acceptance such as the removal of 'honour all cards'
As with all governmental regulations, whilst we know broadly what will happen, it is difficult to guess exactly when this will happen. In the meantime, Visa Europe has made a concession to the EU Commission, which changes the way cross border interchange
rates will be structured and capped in the future. MasterCard wants to get involved, but have a little legal process to deal with first.
Visa's proposals will begin in earnest on 1st January 2015. At this point, cross-border acquirers with operations outside a country, as long as they meet a number of criteria, will be able to offer substantially lower rates to domestic merchants than the
current merchant service charges they are paying. This will be fuelled by Interchange rates of 0.3% (for credit) as opposed to 0.77% (UK), 0.9% (Germany) and 1.3% (Poland). Debit will be charged at 0.2% as opposed to £0.08 (UK). Cue market disruption,
a price war, and a period of land grab as cross-border acquirers try to steal a bigger share of the pie from domestic-only acquirers.
It should be an interesting period lasting up to a couple of years, especially when it comes to seeing which acquirers will make the most of this period of change and who may suddenly leave the business to focus on 'other operations'.
Getting the appropriate licenses is obviously going to be difficult and time-consuming. Also, knowing how many of the major European acquirers use old legacy systems, I do wonder which of them have the technology to claim the lower interchange rates. I can
imagine that the following conversation is taking place between many acquirer CEOs and CTOs in boardrooms throughout Europe: 'OK, so we don't support Interchange ++, single merchant identifiers or complex cross border merchant hierarchies, but surely we support
least cost routing?'
Added to all this, we have the further unknowns such as MasterCard's eventual arrival, EU government timescales and a large number of new market entrants. I can only imagine how little sleep merchant acquirers are getting at the moment.