Original URL: http://www.theregister.co.uk/2012/01/19/ec_payments_consultation/

EU asks why credit cards are so expensive

Reckons industry could save €300bn in six years

By Bill Ray

Posted in Government, 19th January 2012 12:49 GMT

The European Commission is asking for input on better ways to integrate electronic payments across the European Community, and whether today's opaque billing mechanisms can be allowed to continue.

The consultation – which talks about card payments but is most concerned with a future where e-payments and m-payments continue to surge – asks for feedback on how to encourage payment companies to reduce their rates while increasing the security of payments and making it easier to use next-generation payment systems around the EU.

The Green Paper (PDF, hard going but there's an idiots' guide too) asks some specific questions about the whole process. Those include why the cost of paying by card hasn't dropped in the last decade, despite the volume of such transactions scaling up massively. The EC also wants to know why some cards, such as certain debit cards, don't work in every shop in Europe, and if that matters.

It does confuse people, and that confusion is only going to rise as cards (and other tokens such as NFC-enabled phones) host multiple payment schemes. The EC wants to know who should be allowed to specify which payment scheme is used for each transaction, which becomes important when the end-customer probably doesn’t know how much they're paying for the privilege.

The cost of paying by card is almost entirely hidden from the end user, but retailers and banks have to pay each other varying, and negotiable, rates. A card, or more likely a phone, might carry the Visa logo but have multiple accounts held on it and the retailer might have a distinct (and financially motivated) preference for a particular account, so the EC wants to know if they should be allowed to select it automatically.

Conversely, the green paper also asks if every retailer showing a brand should be obliged to accept all payment systems bearing the same brand – so any shop with a "Visa" brand mark would have to accept any card with a Visa logo on it, no matter what bank account was behind that card.

There are also questions about mandating the use of two-factor authentication for online payments, which would reduce fraud at the cost of greater complexity in payments, and the EC would like suggestions on how to manage the former while minimising the latter.

The UK is particularly addicted to plastic cards – we average 2.33 payments schemes per adult – and that's only going to increase as companies like Google stuff their new payment platforms into our phones.

Responses are invited from anyone who cares, but should be filed before 11 April. ®