SEPA & Debit-Card Interchange Fees: One Size Fits None?

Abstract

On May 31st, MasterCard Europe announced that instead of applying SEPA fallback interchange rates for its Maestro debit card from 1 January 2008, it had decided to delay their introduction until further notice. MasterCard cited continued lack of clarity from competition authorities and opposition from certain merchant organisations. The latter had been primarily upset by the level of the announced Maestro interchange fees (IFs), and feared that accepting debit cards would become more costly.

This article discusses the level of the Maestro IFs only indirectly, in the sense that it does not try to determine whether the level is justified or not. Rather, the article focuses on the fact that the IFs are "one size fits all," and this in two respects: there is a single IF for the whole eurozone, and for the full range of transaction sizes. In what follows, I argue in favour of a differentiated IF structure, on both accounts.

Keywords: interchange fees, debit cards, SEPA, low-value payments

JEL Classification: E41, G21, L31, L42