The imminent merger of several European countries into a single domestic market could bring higher credit card fees to the area.
At issue is the creation of the Single Euro Payments Area, which Pascal Burg, a director at financial services and consulting firm Edgar, Dunn & Co., described as an attempt to turn Europe into a version of the United States. Under SEPA, Eurozone countries would be treated as a single market rather than considering individual countries as independent markets. Burg addressed the possibility during a discussion of regulatory issues facing credit card issuers and providers at the Association of Corporate Travel Executives' annual conference in Atlanta last week.
"If you go to Europe and speak to bankers or large merchants, that's all they talk about right now," according to Burg. "It really is changing the payment business in Europe."
The creation of SEPA is not too distant in the future. It's expected to come into being as early as 2008 or as late as 2010, Burg said. One analysis estimated banks could see a loss of payment-related revenues as high as E29 billion, he said, and banks likely would raise card fees to recoup that revenue.
"It's a very short amount of time in the payment business," he said. "Imagine that you had to completely change a business model in 18 months. That's what the banks are having to do right now in Europe."
Recent regulations in Australia also have the attention of the credit card industry, Burg said. The Reserve Bank of Australia has regulated interchange fees—the fee charged by issuers to merchants that is the primary source of income for corporate bankcard issuers—and now allows merchants to add surcharges for credit card purchases. Qantas Airways already has imposed a 1 percent surcharge for such bookings, he said. Meanwhile, banks have begun issuing more cards, such as American Express, that are outside the regulations.
Regulators in the United Kingdom and other parts of Europe eventually might impose similar laws. "You can see how regulators can change a marketplace by intervening," according to Burg. "Regulators in other countries are looking at Australia as an example."
Though interchange fees have been the target of lawsuits in the United States
(BTN, Aug. 15, 2005), regulators have shown a reluctance to similarly intervene. However, airlines are combating fees in other ways, including pushing use of such alternative payment methods as Western Union, checks, Universal Air Travel Plan and PayPal, said Alex Houston, a regional manager with AirPlus International.