Brussels has intensified its investigation into the fees charged by Visa and Mastercard as it zeroes in on whether Europe’s two dominant payment-card networks are abusing their market power. The European Commission, which enforces competition rules, has sent a fresh questionnaire to terminal providers and payments processors to gather details on the card schemes’ fee structures, mandatory service conditions and transparency. By examining how and why Visa and Mastercard impose various charges, regulators aim to determine if their entrenched market positions allow them to inflate fees, stifle competition and leave European merchants and payment service providers with little choice but to pay up.

Probe Broadens After Merchant Complaints

The Commission’s scrutiny of Visa and Mastercard’s card fees dates back to September, when industry groups—ranging from large retail associations to independent payment processors—lodged formal complaints. Merchants complained that interchange and scheme fees were excessive and opaque, adding up to significant costs when handling card transactions. Although the 2015 Interchange Fee Regulation imposed caps on the “multilateral interchange fee” (MIF)—the portion of a card payment that flows from the merchant’s bank to the issuing bank—merchants argued that Visa and Mastercard had simply shifted costs into other fee categories.

Initially, regulators directed a questionnaire at retailers and merchant associations, seeking to understand how interchange fees and related scheme charges affected their operations. The new round of questions, sent in late May, focuses on terminal providers (the companies that supply card-acceptance devices to shops and online merchants) and payments companies that facilitate transactions. This broader outreach suggests that the Commission is building a detailed map of how card fees ripple through the payments ecosystem—from issuers and acquirers to merchants and end customers.

Examining Mandatory Services and Fee Increases

At the heart of the inquiry is whether Visa and Mastercard’s rules force payments firms to accept a growing array of fees and services, leaving little room to negotiate. The latest questionnaire asks respondents to list every fee or service levied by the two card schemes between 2017 and 2024, including any new fees introduced during that period and any changes to existing charges. In effect, regulators want to reconstruct the evolution of Visa and Mastercard’s fee schedules, tracking how and when fees rose and which of those charges are non-negotiable.

For example, Visa and Mastercard each collect “scheme fees” for services essential to card acceptance—ranging from network resilience and fraud prevention to tokenization for online payments. In addition to the capped interchange fee, merchants sometimes face separate “acquirer fees” charged by banks or processors that bundle all scheme fees into their pricing. Because Visa and Mastercard require that all participants in their networks adhere to a unified rulebook, many payments providers find themselves compelled to comply with fee changes even when they are not clearly linked to any new service or cost.

Regulators also want to know how Visa and Mastercard communicate fee changes to payments companies. The questionnaire probes whether fee information is sufficiently clear and whether clients receive adequate notice before new charges take effect. Respondents must detail any complaints lodged with Visa or Mastercard over the past seven years, including how quickly those grievances were processed and what remedies—if any—were offered. Such information will help competition enforcers assess whether the schemes’ internal dispute-resolution mechanisms are effective or merely procedural formalities.

Market Dominance Under the Microscope

Visa and Mastercard collectively process roughly two-thirds of all card payments in the euro area, giving them unrivaled reach in European retail and e-commerce. Their duopoly structure—whereby merchants and acquirers must support both schemes if they want to offer complete payment acceptance—has long drawn scrutiny. Competition experts note that because issuing banks often pay higher MIF rates to attract customer usage, merchants have little choice but to accept both Visa and Mastercard, even if one network’s fees have risen disproportionately.

“The fundamental concern is whether Visa and Mastercard’s near-universal acceptance obliges merchants and payment providers to bear ever-increasing fees,” said a payments industry analyst familiar with the probe. “If every store, online platform and app relies on their networks, they can impose incremental charges with little fear of losing market share. That’s the essence of market power: ability to impose fees without competitive pushback.”

Beyond interchange rates, regulators want to understand how the schemes bundle ancillary services—such as cross-border processing, currency conversion, and data analytics—into their fee structures. Industry insiders report that some fees, labeled as optional or value-added services, effectively become mandatory for maintaining network compliance or accessing critical fraud-monitoring tools. By building a detailed inventory of all scheme and processing fees from 2017 onward, Brussels hopes to assess whether the two card giants have leveraged their dominant positions to extract disproportionate revenues.

Retailers Press for Lower Fees

European retailers, from small merchants to multinational chains, have pushed EU authorities for years to clamp down on high card fees. A group of over a dozen trade associations—representing supermarkets, electronics stores, fashion brands and online marketplaces—filed a complaint in 2023, urging the Commission to investigate not just MIF but the myriad additional fees that weigh on profit margins. For many low-margin retailers, payment processing costs account for a significant share of operating expenses; reducing those fees could free up capital for investment, lower consumer prices and boost competitiveness.

Some national regulators have taken unilateral steps to cap or ban surcharges on card payments. France, for instance, implemented rules prohibiting merchants from charging customers extra fees for using credit cards—yet if the wholesale fees remain high, merchants simply absorb the cost, shifting the burden indirectly onto shoppers through higher product prices. Germany’s Federal Cartel Office launched its own probe into card-scheme fees in early 2024, reflecting wider concerns that fee pressures hamper not only retail but also service industries and gig-economy platforms.

Visa and Mastercard Defend Their Fee Structures

Both Visa and Mastercard have defended their pricing models, arguing that scheme fees reflect the value they provide—security, fraud prevention, network reliability and global reach. Visa notes that its network handles over 200 billion transactions annually worldwide, investing heavily in cybersecurity infrastructure and operational resilience. Mastercard emphasizes its ongoing investments in tokenization, encryption and emerging technologies such as biometric authentication, which it says reduce fraud and enhance consumer trust.

In response to Brussels’ questionnaire, Mastercard issued a statement underscoring its commitment to offering “choice, security and seamless payment experiences” for merchants and consumers alike. Visa similarly contended that its fees correspond to operational and technological costs, benefiting financial institutions and end customers by safeguarding transactions. Both networks point to the near-instantaneous transaction speeds, minimal downtime and robust dispute-resolution frameworks that underpin their global footprints.

Under EU competition law, dominance is not illegal in itself; rather, it is the abuse of a dominant position—through unfair pricing, restrictive contracts or tying arrangements—that can trigger charges. In 2015, the European Union imposed a hard cap on MIF rates to rein in one element of scheme fees, limiting credit card interchange to 0.3 percent of transaction value and debit card interchange to 0.2 percent. That regulation was intended to level the playing field between smaller and larger retailers, preventing issuing banks from raising card-acceptance costs arbitrarily.

However, caps on MIF did not directly address network or processing fees, which can constitute 20 to 30 basis points or more on top of interchange. Critics argue that because Visa and Mastercard bundle numerous services—some of which are essential for merchants—into their scheme fees, the net cost remains high. Moreover, with digital wallets and alternative payment methods on the rise, regulators want to ensure that emerging competitors can gain traction without being hindered by locked-in, inflated fees charged by entrenched card networks.

By surveying terminal providers and payments companies, the Commission is gathering evidence on potential tying or bundling practices. For instance, do Visa and Mastercard require merchants to adopt minimum security protocols exclusively through their certified vendors, effectively prohibiting cheaper third-party solutions? Are acquirers forced to sign multi-year contracts that lock them into certain fee tiers? Answers to these questions will help Brussels determine whether to bring formal charges alleging abuse of dominance.

Implications for Innovation and Competition

A successful antitrust intervention against Visa or Mastercard could reverberate throughout the financial-services industry. For acquirers—banks and fintech firms that process card payments on behalf of merchants—the prospect of lower scheme fees would improve margins and potentially foster competitive pricing for small merchants. It could also open the door for innovative payment schemes—such as open banking or real-time account-to-account transfers—to gain market share.

On the other hand, critics of aggressive regulation caution that undermining the two card giants might inadvertently weaken overall payment security. Visa and Mastercard invest billions each year in fraud detection, data analytics and network resilience. Smaller networks or consortia would need to ramp up their security frameworks quickly to match that scale, a costly endeavor that could slow adoption. Regulators must weigh the benefits of fee reductions against the risk that multiple, fragmented payment schemes might fragment the market or compromise security.

Next Steps: Questionnaire Responses and Potential Charges

The deadline for the newly issued questionnaire is June 2. Respondents—terminal vendors, card acquirers and payments companies—must provide detailed breakdowns of all scheme and processing fees, how they have evolved between 2017 and 2024, and any complaints filed with Visa or Mastercard. The European Commission will use this information to assess whether a sufficient body of evidence exists to allege that the card schemes have abused their dominant positions under Article 102 of the Treaty on the Functioning of the European Union.

If regulators find that Visa or Mastercard’s fee structures or contractual requirements have improperly harmed competition, they could open formal proceedings. Potential remedies include requiring unbundling—so that merchants can opt out of certain ancillary services—capping additional scheme fees, or forcing greater transparency in how fee changes are communicated. In extreme cases, the Commission could impose fines of up to 10 percent of global annual turnover, though it would likely pursue more incremental measures aimed at restoring competitive balance.

This fee probe aligns with the EU’s broader agenda to foster innovation and competition in payments. In 2023, Brussels introduced new rules under the revised Payment Services Directive (PSD2) to promote open banking and reduce barriers to entry for fintech firms. The European Central Bank has also signalled interest in exploring a digital euro, partly to create an alternative to private-sector payment networks. By challenging the entrenched fee models of existing card schemes, the Commission aims to ensure that merchants and consumers benefit from lower costs and stronger competition.

However, the path toward a truly competitive, pan-European payments landscape remains complex. Interoperability, cross-border coordination and regulatory harmonization will be essential. If Visa and Mastercard are required to adjust their fee structures, they must do so across all 27 member states plus the broader European Economic Area—a logistical challenge that involves harmonizing multiple legal frameworks. Yet regulators see the potential benefits as outweighing the costs: a more transparent, competitive market that can support emerging technologies such as instant payments, mobile wallets and tokenized card solutions.

Spotlight on Market Power

As the EU’s antitrust enforcer deepens its inquiry, the spotlight turns to Visa and Mastercard’s immense market power. With two-thirds of euro-zone card transactions flowing through their networks, any change in their fee regimes can ripple through every level of the payments ecosystem—from large retail chains to small corner shops and from banks to fintech startups. By probing the full spectrum of scheme and processing fees, Brussels seeks to ensure that no hidden costs allow dominant network operators to unfairly siphon revenues from merchants and consumers. The coming months will reveal whether regulators will demand significant changes or if Visa and Mastercard can demonstrate that their fees remain proportionate, transparent and open to competitive challenge.

(Adapted from Reuters.com)