20 July 2023 - 2 min Reading time
Febelfin is particularly concerned that the government is pursuing a reduction in the so-called “Interchange Fee”. The Interchange Fee is one of the 3 cost components of card payments. The Interchange Fee is in many cases the lowest cost. Halving that maximum cost then has a very limited effect for the merchant. The government asked all stakeholders for advice on reducing this cost and the sector has formulated its negative advice. It warned of the consequences of a reduction in the Interchange Fee.
Today, the Interchange Fee is 0.2% of the amount paid with a ceiling of EUR 0.05. The legal ceiling in Belgium is currently EUR 0.056. On average, this amounts to EUR 0.033. Moreover, the Interchange Fee in Belgium is already among the lowest in Europe. The Interchange Fee is used by banks to issue payment cards and to finance innovations, examples are instant payments, contactless payments, Payconiq,…. A reduction puts a huge brake on the innovative character of the Belgian payments market.
The Interchange Fee is only one part of the costs that merchants have to pay for a card payment. In addition to the rental or purchase of a terminal, the total cost consists of costs for (1) the acquirer, (2) the card scheme and (3) finally the Interchange Fee. Unlike large retailers, a small retailer is not invoiced separately for these different components. It is therefore rather unlikely that a reduction in the Interchange Fee component will entail a reduction in the total cost for the merchant or consumer.
A reduction in this rate will jeopardize the local Belgian payments ecosystem. Foreign card providers will get a big advantage over Belgian ones because they can charge the cross-border rate, which is almost always higher than in Belgium. An increase in foreign cards on the Belgian market could therefore be very negative for local merchants because they will then be charged the rate that is applied in the country of origin of the card.
Febelfin notes that due to time constraints, the government's rationale for the original proposal relied on superficial research and incomplete information. We call on the government to reconsider its decision and to thoroughly debate cost-for-payments with appropriate impact studies. Febelfin would like to contribute to this. The long-term consequences will be very negative for Belgian banks and the payment market as well as for merchants.