In recent years The Estonian Competition Authority has analysed the interchange fees for card payments. To date, the banks have reduced the fees substantially and made the system more open to competition. For this reason, the Competition Authority has decided to terminate the proceedings.
The interchange fee is paid when a merchant´s bank (acquirer) and a consumer´s bank (issuer) are different. In this case, the bank serving the merchant shall pay an interchange fee to the bank serving the consumer, which is generally a percentage of the amount of the card payment. Interchange fees form a significant part of merchant service fees applied by the merchant´s bank to the merchants and therefore affect the merchants´ mark-up. Indirectly the interchange fees are paid by the consumer as the merchants integrate these costs in the prices of the goods.
In the past, the banks operating in Estonia have multilaterally agreed on the interchange fees. During the proceedings the banks changed to the system of bilaterally agreed interchange fees, where each bank should agree on interchange fees with other banks on an individual basis. The current system is more open to competition, because the interchange fees are affected by each bank´s business strategy.
Banks have reduced interchange fees on a number of occasions during the course of the proceedings. As a result, the interchange fees have decreased from the jointly agreed 1% initially in force at the beginning of 2008 on average to 0,5%. Thereby, some banks have agreed on an additional reduction of interchange fees with the increase of card payments in volume. As a result the average fees will most likely continue to decrease significantly in the future. The analysis shows that the cuts of the existing interchange fees have been carried over to the merchants´ fees, and this should also impact consumers.