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Recently, Visa and Mastercard reached an agreement with the European Commission to reduce their respective interregional MIFs starting October 2019, bringing these interregional fees more closely in line with internal EU rates. The agreement cuts interregional MIFs by an average of 40%, which will significantly reduce the costs for businesses in the EEA when accepting payments from cards that are issued outside the EEA. Under Visa and Mastercard’s commitments, fees for online purchases would be capped at 1.15% for debit cards and 1.5% for credit cards – down from around 1.8%.
The reduced fees will apply to payments made with Mastercard, Maestro, Visa, Visa Electron and V-PAY credit and debit card brands.
Pricing models affect merchant costs
This means significant savings for businesses, as payment service providers can pass these savings on to the merchant. Online businesses that are processing payments through the IC++ model will have a transparent view of these reduced fees and will be able to see the cost-savings reflected in their statements. As a European acquirer operating under the IC++ pricing model, Checkout.com will pass these cost savings directly to online merchants and retailers processing from the EU.
Meanwhile, the Payment Systems Regulator (PSR) is reviewing potential measures to force more transparency from the major card schemes Visa and Mastercard.
Likely consequences for merchant payment processing
Merchants who are processing with a PSP under a Blended or ‘flat’ pricing model, however, will likely not see any benefits from the cuts. Under blended pricing, merchants may continue to pay the original agreed-upon flat rate to their PSP at who’s discretion it will be to pass those savings to their merchant or not.
Understanding how you can benefit from these new fee caps is critical and can lead to considerable savings. Businesses should review their current PSP agreements to ensure they benefit fully from this new fee cap, especially for high-volume businesses.
Currently, these fee commitments only apply to businesses set up in the EU, but businesses based outside of the region can still benefit. Merchants based outside the EEA that see a high proportion of traffic or customers coming from that region should consider setting up an EEA entity in order to take full advantage of Interregional MIFs as well as intraregional EU rates. If an EEA entity is already established, retailers should consider routing more payment volume through that setup in order to capitalize on the new rate.
Contact Checkout.com today to speak with one of our payment experts and learn how your business can benefit from Visa and Mastercard’s new interchange fee caps.
