London - AirPlus International has warned the
overwhelming majority of its German corporate card customers that it plans to start
charging a transaction fee every time they use the card. The fee, provisionally
scheduled to take effect in December, will apply to the 83 percent of German
corporate card clients with an individual-pay agreement, in which cardholders settle
with the issuer out of their private bank accounts but are reimbursed by their
employer. The remaining 17 percent—who have corporate pay agreements, in which the
employer settles the bill directly—will not face transaction fees, and neither will
users of AirPlus' centrally billed Company Account product, which accounts for
80 percent of the company's global business.
The introduction of the fee follows an 11th-hour
twist to the long-running saga of European Union interchange fee regulations,
which starting in December will cap at 0.3 percent the interchange fee that Visa
and MasterCard issuers (though not "three-party" issuers such as
American Express) can charge on credit cards. AirPlus currently charges 1.6 percent
to 1.7 percent, similar to other MasterCard issuers. Throughout 2014, AirPlus,
MasterCard and others lobbied for commercial cards to be exempted from the
regulation. Ultimately, they were successful, and the exemption was defined with
the following wording: " 'Commercial card' means any card-based payment
instrument issued to undertakings or public sector entities or self-employed
natural persons which is limited in use for business expenses where the
payments made with such cards are charged, directly or indirectly, to the account
of the undertaking or public sector entity or self-employed natural person."
However, days after receiving confirmation in
December that the exemption had been included, issuers found that the words "or
indirectly" had been removed without warning. "The lobbying experts
warned us throughout that if we didn't pay attention, something could fall off
the table at the last minute," AirPlus managing director and chairman
Patrick Diemer said at a media briefing here last week. "At the last
minute, the regulators made this change about individual-pay cards."
AirPlus is working on the assumption that the
change excludes individual-pay cards from the exemption, though the text is not
explicit. The company plans to introduce the transaction fee when the regulation
takes effect in December but is speaking to regulators in each EU member state
to see whether they will include individual-pay cards within the exemption when
they convert the EU regulation into their own national laws. AirPlus will argue
that individual-pay cardholders are not really consumer cardholders because each
one's personal account is used only "as a clearing mechanism," said
Diemer.
Different member states could take different
views. "That would be a nightmare, but that is a possibility," Diemer
said. The uncertainty explains why AirPlus has not yet decided whether it will
impose transaction fees in other countries where it offers corporate cards.
Ironically, AirPlus individual-pay customers
may end up net winners despite having to pay transaction fees. The new
regulation forbids merchants to surcharge consumer credit card transactions, a
common practice by airlines, not least by Lufthansa Group, which in yet another
irony owns AirPlus. Diemer said some customers may find individual pay works
out cheaper for that reason and will need to assess their overall costs on a
case-by-case basis.
However, Diemer anticipates few clients
changing their card agreement structures. "Before we had any discussions
with our customers, we thought many would want to move to corporate pay, so it
was surprising to learn how reluctant they are to change their business
processes," he said. Legal and logistical reasons for sticking with
existing arrangements include avoiding the need to change agreements with
workers' councils, alter payment and data feeds and make changes to cash-flow
assumptions.