The European Commission (EC) has issued new rules that allow merchants to select suitable processor for their card transactions.
Aimed at promoting more competition in processing card payments and giving benefits to cardholders, the new directives also seek to boost independence status of payment card schemes and processing entities.
Commissioner Margrethe Vestager, in charge of competition policy, said: “Many consumers use payment cards every day in shops or online. The Interchange Fee Regulation has capped fees charged by the banks for these card payments, which are ultimately paid by consumers.
“The new rules will bring more competition to the processing of card payments, which should further reduce costs to the benefit of consumers and retailers.”
When a consumer pays using a card, the transaction is processed by processing companies which provides the necessary communication and IT systems for the payment to be finalised.
In order to process the payment, the payment card schemes often offer their own services and therefore vie with many other independent firms that also provide the same processing services.
The new rules, effective from 7 February 2018, introduces detailed requirements pertaining to the separation of certain functions to ensure the independence of processing activities within card schemes
As per the new rules, the payment card schemes will have to limit information exchange besides maintaining separate profit and loss accounts, separate corporate organisation (workspaces, management and staff) and separate decision-making.
The partition of functions will allow merchants to select the most suitable processor for their card transactions.
The latest rules follow the 2015 Interchange Fee Regulation, whereby card schemes were ordered to ensure the independence of their own processing activities from the rest of their operations.
EC said that the rules were aimed at preventing card schemes from favouring their own processing entities over competing processing entities. It also stopped them from clubbing processing services with other services that they offer.