Swiss banks are wooing customers with fee-free and digitally-enabled debit cards. But it’s the merchants who are footing the bill. The Competition Commission is now opening a formal investigation against each card giant, Visa and Mastercard.
The Competition Commission (Weko) has opened two investigations against card networks Visa and Mastercard in Switzerland. This was announced by the authority on Thursday. The formal proceedings are intended to find long-term solutions for the so-called interchange fees of Visa and Mastercard debit cards.
The new debit cards of the two leading providers, Visa and Mastercard, are currently being circulated on a large scale by the banks as card issuers. They replace the familiar Maestro card. The new generation of cards is popular with customers and banks alike: fees are often low for users – or are waived altogether. This is because the new debit cards are also easier to integrate into digital financial services.
However, since its introduction, retailers have been paying the bill for the brave new fintech world. Unlike the Maestro card, retailers owe the interchange fee to the payment processors (such as terminal providers like Worldline or Viseca) and card issuers (usually a bank). In Switzerland, this was previously only known for credit cards. The new fee is added to the other costs merchants pay for card payments.
Visa and Mastercard determine the amount of the interchange fee. As Weko announced on Thursday, given the costs arising from the market launch of the new debit cards, it has granted an interchange fee of 12 centimes per transaction – but only until a market share of 15 per cent is reached. According to Weko, this is now the case for Mastercard and Visa; the market launch phase has thus been completed, according to the competition regulators.
The task now is to redefine the level of the interchange fee – which is also the subject of the two investigations.
Weko will try to reduce the fee. This is analogous to the interchange fee in the credit card sector, which has been concentrated step by step in recent years under pressure from the Commission. Since 2017, an average interchange fee of 0.44 per cent has applied to transactions with Swiss credit cards. How a reduction in the price will affect debit card fees for end users remains to be seen – it is possible that banks and banking apps will become more reluctant to offer freebies.
According to Thursday’s statement, there are signs of a quick agreement with Mastercard and a decision in the form of an amicable settlement. On the other hand, Visa’s differences still need to be “clarified in more detail,” Weko said. The presumption of innocence applies to both companies.
