State of the Industry Report September 2024

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CMSPI – IAC State of the Industry Report

THE HORIZON – INTERCHANGE CAP DEVELOPMENTS IN THE 2020s In this report scope, there are several countries in the midst of consultation or implementation of new interchange cap standards: Brazil

2023, 2024 (staggered implementation)

1.14% (0.8% in Oct 2024)

0.5% (0.3% in Oct 2024)

Three-Party Card Networks

Chile

2021

Competition 209

AUD 0.08 (~$0.05) weighted average ($0.10 or 0.2% for individual transactions) 211

0.5% weighted average (0.8% for individual transactions) 210

Three-Party Card Networks, International Cards

2017, 2021 (updated debit)

Cost 212

Australia

2003

In 2022, the Central Bank of Brazil placed caps at 0.5% on individual debit card transactions, effective on April 1, 2023. 219 This essentially nullified the former weighted average cap, which was at a weighted average of 0.5% with a 0.8% cap for individual transactions. Canada In May 2023, the Department of Finance secured voluntary pledges from Visa and Mastercard to decrease domestic consumer credit interchange fees for small businesses and non-profits with under $300k in Visa sales and $175k in Mastercard sales. 220 These reductions target an annual weighted average rate of 0.95% for in- store transactions and a 10 basis points reduction for online transactions, with the changes set to take effect in the fall of 2024. 221 Chile In 2021, the Chilean Senate granted approval for legislation establishing a four- member committee comprising representatives from the Ministry of Finance, the Central Bank of Chile, the Commission for the Financial Market, and the National Economic Prosecutor’s Office. Using the cost methodology, the committee published new staggered interchange rate caps from 2023 to 2024.

2016

0.45%

0.35%

China 213

0.9% (POS/online), 0.8% (QR code); for SMBs 214 0.4% (POS/online), 0.3% (QR code)

Credit Cards, International Cards

Competition

India

2017

2018

0.5%-1.5% (depending on annual sales)

0.25%-1.25% (depending on annual sales)

Merchants with Annual Sales Above 3 Billion Won (~$2 million)

2015 216 , 2021 217

2016, 2022 (updated)

South Korea 215

Competition

Table 5.1 – Current Interchange Caps for Credit and Debit Cards by Country 218

Rate from publication (Feb 2023)

Stage 1 Rate (Oct 2023)

Stage 2 Rate (Oct 2024)

Card Type

209 https://www.fne.gob.cl/wp-content/uploads/2022/08/Instruccion-de-Caracter-General-N5_2022.pdf 210 https://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/conclusions-pa- per-may2016/interchange-fees-and-transparency-of-card-payments.html 211 The RBA also established a sub-benchmark for the weighted average interchange cap of single-network debit cards (SNDCs) at AUD 0.08 to remove incentives for issuing these kinds of cards. https://www.rba.gov. au/payments-and-infrastructure/review-of-retail-payments-regulation/conclusions-paper-202110/pdf/re- view-of-retail-payments-regulation-conclusions-paper-202110.pdf 212 Some ACCC rules on surcharging in Australia are linked to cap levels. Card surcharges | ACCC 213 https://www.reuters.com/article/china-cenbank-idUSL3N16Q2TM/ 214 Small merchants have an annual turnover below Rs 20 lakh (~$24k) https://www.medianama. com/2017/12/223-rbi-mdr/ 215 https://www.fsc.go.kr/po010104/77120?srchCtgry=&curPage=2&srchKey=&srchText=&s- rchBeginDt=&srchEndDt= 216 https://www.fsc.go.kr/eng/pr010101/22108?srchCtgry=&curPage=4&srchKey=cn&srchText=credit%20 card&srchBeginDt=&srchEndDt= 217 https://www.fsc.go.kr/eng/pr010101/77122?srchCtgry=&curPage=&srchKey=cn&srchText=debit%20 card&srchBeginDt=&srchEndDt= 218 Unless otherwise sourced, CMSPI Estimates and Analysis and the Federal Reserve Bank of Kansas City, “Public Involvement in Payment Card Markets: Various Countries” August 2023 Update. There are no known cases of current caps specific to the following countries: Singapore, Japan, Saudi Arabia, Turkey, the UAE. This is based on CMSPI’s known resources.

Credit Debit

1.48% 0.60% 1.04%

1.14% 0.50% 0.94%

0.80% 0.35% 0.80%

Prepaid

Table 5.2 – Chilean Limits on Interchange Rates 222

219 https://agenciabrasil.ebc.com.br/economia/noticia/2022-09/bc-estabelece-limite-de-cobranca-de-taxas- nas-maquinas-de-cartao 220 https://www.finextra.com/newsarticle/43413/visa-and-mastercard-lower-canadian- interchange-fees 221 https://deputypm.canada.ca/en/news/news-releases/2023/05/18/government-announces-lower-cred- it-card-transaction-fees-small 222 https://www.bcentral.cl/documents/33528/4387881/RIII.1.pdf/f3071bec-5ae0-6d9e-f61f-27ada049b633