TOWARD FAIRER AND COMPETITIVE PAYMENT SOLUTIONS IN THE EU

© 2013 EUROCOMMERCE | 2

SEPA — THREAT OF HIGH FEES ACROSS EUROPE

FEE TODAY

FEETODAY

TOMORROW?

TOMORROW?

FEETODAY

FEETODAY

FEETODAY

TOMORROW?

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CURRENT MIF SYSTEM ADDS COSTS

Consumer bank (issuer) Retailer bank (acquirer)

Card SchemeExclusive Clearing

& Settlement

MIF covers: marketing costs ‘free’

gifts; fraud costs, insurances and

payment guarantee

No access to

consumer account

information

MIF inflates the price of products

(may be additional surcharge)

Retailer receives

only part of the

product price.

Merchant Service Charge (MSC)

= MIF plus Processing FeesMSC

Retail Price minus MSC

Consumer account

Retailer account

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BASIC PAYMENT PROPOSAL

Consumer bank*(’issuer’)

Retailer bank*(’acquirer’)

Processing, clearing & settlement: • Unbundled fees• Choice of PSP, payment type

and clearing & settlement

Consumer account

Retailer account

INCREASED CHOICE

RETAIL COSTS OF PAYMENT ARE

FAIR AND TRANSPARENT

no more restrictive

contractual rules

access to clearing

and settlement

direct access to

funds availability

*or any other payment service provider (PSP)

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WHO SHOULD PAY FOR WHAT:

Fraud prevention

Paying for fraud when it happens

Chargebacks (the money the consumer gets back when they’re the victim of fraudulent transactions)

ISSUING BANK/PSP

Consumer can also choose to pay for extra services eg:• Credit facility• Extra insurances• Air-miles and preferential services

(Payment provider or retailer may also offer to cover these costs)

C O N S U M E R R E TA I L E R

Costs of authorisation

Clearing and settlementprocessing costs

Retailer may offer to cover some consumer costs

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BASIC PAYMENT BRINGS BENEFIT TO ALL

Low-cost basic debit service across EU

Freeing up of revenues results in lower costs and prices

Available for face-to-face, internet and mobile technologies

Full transparency on costs of different payment methods

Low-cost basic debit service which operates across EU

Removal of excessive costs for payment acceptance

Freeing up of revenues results in lower costs and prices

Freedom to choose payment provider

A lower-cost, efficient EU payments system

Open market allows competition and innovation

Growth of cross-border e-commerce market

Maximise potential of new technologies

S O C I E T Y A N DE U E C O N O M Y

R E TA I L E RC O N S U M E R

Basic payment opens access to pan-European market

Expanded market for electronic payments

A viable alternative to cash

Ability to choose which extra services attached to payment

No loss of security in payment system

Ease of cross-border and e-commerce purchasing

Card payments more available in small retail outlets

Small retailer can access low-cost electronic payment method

Access to cross-bordere-commerce

Enable retailer to benefit from new technologies

B A N K S A N D C A R D

C O M PA N I E SFacilitate shift from cash to electronic payment methods

No loss of security in payment system

Create incentives to combat fraud at source

Transparency and trust in banking payment services

Increased volume of transactions

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WHAT REGULATORS SHOULD DO :

• Remove MIF barriers:• Current debit MIF system should be removed• Fees for credit should be cost-based

• Unbundle fees: costs for extra services are transparent, paid by beneficiary of service

Remove MIF barrier

• Bring more third party PSPs under regulation • Allow PSPs access to verify availability of funds on consumer accounts• Ensure EU-wide, real-time processing and clearing & settlement• Separate authorisation services from clearing & settlement to allow

competition and retailer choice (card or other SEPA instrument)• Separate processing services from card schemes• Allow access to clearing & settlement for licensed PSPs

Open payments market to new players

• Remove honour-all-card rule restrictions • Enable retailer to electronically identify cost of card acceptance at POS• Allow account information access• Remove national/cross-border price differentials & allow pan-European

(x-border) acquiring • Enable consumer/merchant choice of payment application at terminal • Allow consumers to authorise payments through PSPs across EU

Remove restrictive contractual rules