Global POS interchange fee income increases 140% in six years

Global POS interchange fees increased 140% between 2000 and 2006, to $64bn (€48bn). This massive growth in POS interchange fees was mainly fuelled by a phenomenal increase in payment card purchase expenditure worldwide and increased interchange rates in the USA, and occurred despite reduced interchange rates in Australia, Europe and elsewhere.

A new study by Retail Banking Research (RBR) analyses the evolving and increasingly complex landscape for POS interchange fees. It forecasts major changes to POS interchange fee arrangements and fee levels around the world.

The study argues that the future for POS interchange fees is uncertain, for five main reasons:
• Competition and other public authority interest in POS interchange fees is continually growing
• Authorities are taking increasingly tough stances on multilateral interchange fee (MIF) arrangements
• The European Commission's actions and findings - such as the December 2007 ruling that MasterCard's MIFs are restrictive business practices - influence those of National Competition Authorities
• Pressure from merchants and retailer associations towards reduced interchange fees (or even their removal) is increasing
• There is political and regulatory pressure to converge and standardise fees in the SEPA area.

The study predicts a decline in the levels of POS interchange fees, which in association with changes to interchange rate structures and payment scheme rules will have major strategic implications for payment card organisations, issuers, acquirers, merchants and consumers.