“MIF pays for the payments industry, it has paid for its innovation and development!” said Gary Munro, Consultant at Consult Hyperion. The relevant question here would be what would happen if we reduce MIF, and what would be the effect on the industry and on the consumer?
The Multilateral Interchange Fees Roundtable took place in London on 29th January, powered by Vendorcom | The Cards & Payments Community. The aim of the event was to look at the new proposals for European payments regulation with respect to Multilateral Interchange Fees, and to share the thoughts and concerns of the delegates and their respective companies, so as to achieve some level of clarity around what is happening within the payments industry from the interchange fee and regulatory perspective.
A group of like-minded individuals, from different parts of the payment industry, participated in the roundtable and behaved as a collective group in order to come up with better recommendations for the regulatory bodies on what should be decided for the benefit of all stakeholders in the European payments ecosystem.
As a speaker in the MIF roundtable, I shared my views on how the proposed Regulation on Multilateral Interchange Fees might impact the payment business and the acquiring industry. And with acquiring industry I obviously mean not only acquiring banks or payment institutions, but also PSPs and other providers within the acquiring value chain. After catching a glimpse of what the policy makers are trying to achieve with the proposed regulation, I analyzed some of the main changes that it might bring to the table and its potential business impact, especially when the requirements laid down in its current wording may induce effects contrary to their objectives.
“It is very important to have a strongly interoperable market and we need to delve much more deeply into the implications of the proposed MIF regulations. The impact will be particularly strong because of the two-year phased approach being proposed on this slot. We will see large merchants needing to do more cross-border business. They will benefit, and there will be the smaller businesses in the merchant arena that will suffer in this particular area,” highlighted Paul Rodgers, Vendorcom Chairman.
One of the biggest challenges in the view of Kevin Smith, Director at Consulting LTD, is that: “If you are a player outside Europe, looking to enter the European marketplace, do not assume that whatever you’ve deployed in your own market will work equally in Europe. Europe is different, with multiple markets, different technologies, languages, cultures, different regulations and an umbrella pan-European view.”
The specific points covered during the MIF roundtable were levels of interchange fees, consumers’ and merchants’ perspectives on MIF, and the separation of card schemes from processing entities. And, above all, the impact of EU MIF regulations on merchants, consumers, banks, and on businesses in general, as well as inconsistencies, potential unintended consequences, market dynamics and what the future may hold.
A few years ago interchange fees were relatively high – maybe too high for reaching a balanced and profitable cross-border ecommerce space. However, interchange fees also played a role historically in steering the different parties to a payment transaction towards behaviors that were beneficial for security and efficiency (i.e. in a way that more secure and fast transactions were subject to lower fees). So MIF was not a meaningless ‘tax’. However, and regardless of the fact that the proposed EU Regulation on MIF has its flaws, we should look on the bright side, so that the payment industry opens up and providers are able to redesign their business models for them not to be too biased by interchange, focusing more on adding value to customers, who should be at the heart of the new landscape propositions and developments.