The National Bank of Serbia (hereinafter: the „NBS“) has prepared the Draft Law on Interchange Fees and Special Operating Rules for Card-Based Payment Transactions (hereinafter: the „Draft Law“) which adoption would limit interchange fees and establish rules in dealing with payment cards.
Interchange fees are fees paid by the acquiring bank (the bank that provides a merchant with a POS terminal and executes card-initiated payment transactions) to the bank that issued the card, for each transaction carried out at the point of sale. These fees represent an important element of the merchant fee that acquiring bank charges to the merchant for each card-based payment transaction.
Generally, the amount of merchant fee directly depends on the negotiating power of a merchant, so large retail chains usually receive favourable offers from banks, while small merchants, artisans, and small shops do not come to such negotiating position and the banks offer them merchant fees that are higher, which discourage introduction payment cards to small shops.
By lowering interchange fees as a generator which guides the market to a non-optimal direction, the law primarily aims to create the conditions in which competition among banks and card schemes would lower the prices for end-users.
The Draft Law stipulates that the limitation of interchange fees will be implemented in two phases – in the first nine months of implementation of the law interchange fees would be reduced to a level of 0.5 percent for debit cards and 0.6 percent for credit cards, and after that to the level of 0.2 percent for debit and 0.3 percent for credit cards.
Another novelty in the Draft Law is significantly improvement of the transparency of fees charged by the acquiring bank to the merchant. Transparency of fees that the acquiring bank charges to the merchant is enhanced by obligation of the bank to submit to the merchant, following the execution of an individual card-based transaction, among other, the information on the amounts of the merchant and interchange fees related to the transaction. Additionally, the rule of a uniform calculation of fees can no longer be imposed to the merchants, in which case the acquiring bank does not determine the merchant fee depending on the type of card used for payment, but instead, the merchant fee is defined in uniform manner – the cards with a lower interchange fee (e.g. debit cards) subsidise the use of “more expensive” cards (e.g. credit cards).
The Draft Law, based on the example of the regulations applying in the European Union, is on the public debate, and remarks and suggestions may be submitted by 20 September 2017.