News Release

For Media - Louise Herbert, MasterCard Worldwide +32-(0)2-352-4701 or +32-(0)498-585647
For The Investment Community - Linda Kirkpatrick, MasterCard Worldwide +1-914-249-4565

MasterCard Europe to Challenge European Commission Decision on Cross-Border Interchange Fees

If Adopted Across the EU, Decision Could Lead to Higher Cardholder Costs and Fewer Electronic Payments, and Impede the Implementation of SEPA

Waterloo, Belgium and Purchase, NY, December 19, 2007 - MasterCard Europe said that it will appeal to the European Court of First Instance today’s decision by the European Commission regarding MasterCard Europe’s default cross-border interchange fees. The Commission’s Order requires the company, among other things, to “repeal [its] Intra-EEA fallback interchange fees, as well as [its] SEPA/Intra-Eurozone interchange fees” within six months. The Order applies only to “interchange fees for MasterCard branded consumer credit and charge cards and for MasterCard or Maestro branded debit cards”.

MasterCard Europe believes that it has strong grounds for its appeal. While it will comply with the Commission’s Order, the company said that it is prepared to take action so that its payment products remain competitive and continue to benefit the millions of European cardholders who use and merchants that accept MasterCard and Maestro cards.

MasterCard Europe said its decision to appeal is based on its firm conviction that market forces, not regulation, should drive key decisions such as the setting of interchange fees and retailers’ choices over which forms of payment to accept. The company also pointed to the experience in Australia, the only other jurisdiction in the world to regulate interchange fees, where consumers have ended up paying more for credit cards and receiving fewer benefits and less choice.

If left unchallenged and adopted by national regulators, the Commission’s approach would not only be bad news for consumers but a blow to investment and innovation in the European payments industry, resulting in slower implementation of the Single Euro(pean) Payments Area (“SEPA”), MasterCard Europe said today.

Commenting on the decision, Javier Perez, President, MasterCard Europe, said:

“We are disappointed that after years of review of MasterCard Europe’s transparent, default cross-border interchange fees, the Commission failed to appreciate that without a mechanism to fairly share costs among all the participants in a payment system that functions across Europe and around the globe, consumers will be hurt. Although MasterCard Europe itself does not receive any revenue from interchange, it, like all other payment systems, must balance the needs of, and costs to, both cardholders and merchants in order to remain competitive and innovative.

“The Commission has also ignored the experience in Australia where regulators forced down interchange fees, resulting in higher cardholder charges, reduced card features and benefits, less competition, and diminished investment and innovation. Moreover, there is no evidence that consumers benefited from lower merchant prices as regulators predicted. Not surprisingly, the Australian payment card business has seen slower growth since regulation was introduced.”

Given that the Commission’s Order appears to call for an even greater reduction in interchange fees than occurred in Australia, the adverse effects on European consumers could be even more severe.

Perez continued:

“Forcing drastic reductions in interchange fees across Europe could delay implementation of SEPA, as well as reduce incentives for payment institutions to expand into new domestic European payments markets. In addition, a large reduction in issuers’ revenues would force cutbacks on the necessary investments in new services and technology. This goes directly against the goal of establishing a single market for payments throughout the euro area and the European Union as a whole so that all consumers can pay for goods and services across national borders with the same ease and under the same conditions as when they make payments at home. Because we are strong supporters of SEPA, we are very concerned that the Commission’s decision casts a shadow of uncertainty over this effort and, ultimately, will hurt European competitiveness.

“Far from providing clarity, today’s decision leaves MasterCard Europe and the entire payments industry in doubt as to what interchange fees the Commission will allow.

“Europe wants to reduce reliance on cash in favour of electronic payments, which are safer, cheaper, more secure and more convenient for consumers and merchants alike. The best way to accomplish this is to allow open, transparent and efficient payment systems like MasterCard and Maestro to compete unhindered in the market,” he said.

“And, as is often the case when market forces are supplanted by regulation, it is the smaller merchant and less-well-off consumer that will be hurt the most,” he added.

MasterCard Europe has not yet received a copy of the Commission's decision. However, based on the Order and the arguments advanced by the Commission during the proceeding, the company believes that the Commission has failed to appreciate that, in order to compete successfully with three-party systems and other forms of payment, four-party payment systems like MasterCard and Maestro need to deliver value to cardholders and merchants. This requires interchange fees or some other cost-balancing mechanism.

Perez concluded:

“While we will meet all of our legal obligations during the appeal, MasterCard Europe will take action so that its payment products continue to benefit cardholders and merchants, and remain competitive. Despite our disagreement with the decision, as we have done in the past, we will continue to seek common ground with the Commission in order to serve the interests of European consumers and merchants.”

In open, four-party systems like MasterCard and Maestro, the four parties are the cardholder and his or her bank (the “issuer”) and the merchant and its bank (the “acquirer”). Default interchange fees, which have been part of the MasterCard system for more than 40 years, have proven to be the most transparent and efficient way to balance the costs and benefits among these parties and promote a healthy, competitive and innovative payments industry.

Interchange is a small fee paid by the acquirer to the issuer, and is typically passed on as a component of the fee merchants pay for the many benefits they receive when they choose to accept payment cards. These include increased sales, fast and secure payment, and protection against fraud and cardholder default. Without interchange fees or some other balancing mechanism, cardholders would have to pay nearly all of the costs of the payment card system. MasterCard believes not only that this would be unfair but that, in the long run, it would not even be in the merchants’ best interest. This is because it would lead to greater reliance on cash and more expensive three-party system cards, like those of American Express, where the payment company acts as both issuer and acquirer and typically charges merchant fees that are higher than those of MasterCard and other four-party systems.

Conference call information

At 3:00 p.m. GMT / 10:00 a.m. EST today, the company will host a conference call to discuss the details of this press release. The dial-in information for this call is 866-356-3095 (within the U.S.) and +1-617-597-5391 (outside the U.S.). The passcode is 85394601.

Later today, a replay of the call will be available for one week following the live call. The replay can be accessed by dialing 888-286-8010 (within the U.S.) and +1-617-801-6888 (outside the U.S.) and using passcode 23421924. The live call and the replay can also be accessed through the Investor Relations section of the Company's website at

About MasterCard Europe
MasterCard Europe is the entity responsible for managing MasterCard Worldwide business in Europe - for Europe. With headquarters in Waterloo, Belgium, MasterCard Europe works with 51 European countries organized administratively into three customer areas, incorporating the Single Euro Payments Area (SEPA), mature markets and the developing markets of Europe, stretching as far afield as the eastern border of Russia. Through its network of local offices, MasterCard Europe can understand and meet the diverse needs of customers in the very different types of markets throughout Europe, enabling people to do business in their own way in their own language.

For more information on the European Commission decision, go to:

About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to

Forward-Looking Statements – United States Private Securities Litigation Reform Act of 1995
Statements in this press release which are not historical facts, including statements about MasterCard’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company’s ongoing obligations under the United States federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in general economic or industry conditions, changes in financial condition, changes in estimates, expectations or assumptions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation:

  • the likelihood of higher cardholder costs and fewer electronic payments as a result of the European Commission decision on cross-border interchange fees;
  • the likelihood that the European Commission decision on cross-border interchange fees will impede the implementation of SEPA and, ultimately, will hurt European competitiveness;
  • the strength of the company's appeal on legal and economic grounds;
  • the company's ability to have its products remain competitive and continue to benefit millions of European cardholders;
  • the likelihood that the European Commission's decision will be a blow to investment and innovation in the European payments industry; and
  • the likelihood that the European experience will track the experience in Australia, potentially resulting in higher cardholder charges, reduced card features and benefits, less competition, slower growth and/or diminished investment and innovation.

Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company’s filings with the Securities and Exchange Commission (SEC), including the company’s Annual Report on Form 10-K for the year ended December 31, 2006, the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2007, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company’s results to differ materially from expected results.