On Tuesday, the European Union Commission (EUC) disclosed that
card giant -
) is being investigated for charging excess processing or
interchange fees to the cardholders traveling into the European
Accordingly, EUC is suspicious of MasterCard violating
competitive rules in the market by charging higher cross-border
and interchange fees on transactions than otherwise charged to
European cardholders. Even the premium cards are under the
purview of the scrutiny.
Such higher interchange fee that has been varying from 0.2% to
1.6%, across 27 nations of the EU, has been hampering the
shoppers' experience in the region. Further, the issue highlights
the upswing in non-cash payments, raising anti-trust concerns
over faulty business practices with regard to
merchant-transactions, overall thwarting healthy eCommerce and
An adverse outcome of the enquiry held by EUC could impel
MasterCard to shell out about $740 million or about 10% of its
earnings in 2012 as penalty for the proved damages.
Nonetheless, this is not the first time that MasterCard has
been caught in the act by the European regulators. In 2007, the
company was compelled to limit its debit and credit card fee to a
maximum of 0.2% and 0.3%, respectively. In the same year,
) was completely barred from charging cross-border fees in Europe
based on anti-trust issues.
Additionally, Visa Europe is also facing a similar probe as
MasterCard. Hence, MasterCard is not the first card giant to be
found playing foul by the EUC.
Meanwhile, both card companies are about to face problems in
the US, as retail merchants turned down the proposed multi-state
US merchant lawsuit settlement of $7.25 billion, entered in Jul
2012.The rejection comes at a time when the card companies are at
the final leg of receiving approval for the federal court of
Faulty business principles of the card giants ultimately hit
consumer purchasing powers, compromising whole market dynamics.
On the flip side, it amplifies the financial damages for the
companies, marring earnings and market confidence.
While MasterCard carries a Zacks Rank #4 (Sell), other strong
electronic payment service providers include Visa,
Total System Services Inc.
). These stocks carry a Zacks Rank #2 (Buy).
FISERV INC (FISV): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis
TOTAL SYS SVC (TSS): Free Stock Analysis
VISA INC-A (V): Free Stock Analysis Report
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