October 07, 2009
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Americans Pay The Highest Interchange Fees Worldwide, Pt.3
How it was done down underAustralia made credit card interchange fees a focus back in 1997 when a special board was developed within the Reserve Bank of Australia to examine the formation of interchange fees more closely. In 2001, the board's findings indicated that card networks were not operating adequately in the competitive market. The break in the system was attributed to the manner in which the credit card fees were hidden and a lack of consumer education on their payment options. After close examination of a 1998 financial legislation, the Reserve Bank of Australia concluded that the credit card interchange system fell under the laws domain. On the basis of that law, Australia demanded a cut in the interchange fee rate.
Australia didn't stop at demanding that credit card companies reduce the interchange fee rate; lawmakers remained diligent by enacting several interchange reform bills. The new reform would restructure a more efficient payment system and increase competition. These new rules served to increase the transparency of the credit card payment system and fostered a healthier economic system. Since the new rules became effective in November 2003, interchange fees in Australia have dropped nearly .45%. According to Australia's Reserve Bank, lower fees have contributed to lower prices leaving Australians with higher savings.
In a similar move in 2007, the European Commission stated that MasterCard had violated European Union's antitrust rules with their credit card interchange fee structure. Officials maintained that consumers were actually paying twice for the same convenience; first through annual fees and second through increased retail prices resulting from interchange fees. The European Commission remained committed to their cause and in April 2009 reached an agreement with MasterCard in reducing the cross-boarder transaction fees and drop their appeal to increase fees. In so doing, MasterCard reduced the EU interchange fee to nearly half. The European Commission has not stopped with this latest victory; they have begun the same proceedings against Visa whose interchange fee currently sits at .7%.