Yesterday 22nd January, the European Union (EU) imposed a fine of USD 648 million on MasterCard because of its excessive fees.
The company, in fact, would have hindered the access of merchants to payment services by increasing card fees.
This practice, which violates EU antitrust rules, has enabled MasterCard to “artificially raise the costs of card payments, harming consumers and retailers,” as EU Competition Commissioner Margrethe Vestager said.
MasterCard, the second largest card payment system in the European economic landscape, allows banks to offer related services with circuits marked with common marks: Maestro is one example.
MasterCard, therefore, acts as a platform through which banks ensure that payments are made and that funds are transferred to the merchants’ banks.
When a consumer uses a debit or credit card in a physical store or on the Internet, the merchant’s bank, called the “acquiring bank”, pays an exchange fee to the cardholder’s bank, called the “issuing bank”.
The acquiring bank then passes this fee on to the retailer who includes it, like any other cost, in the final prices for all consumers.
The European Commission (EC) noted that MasterCard obliged the acquiring banks to charge the fees of the merchant’s country.
Before December 2015, when the exchange rate regulation introduced certain limits, these rates varied considerably from one country to another, even within the EU itself.
As a result, merchants in countries with high exchange rates would not have been able to benefit from the lower rates offered by an acquiring bank located in another Member State.
The EC then opened an antitrust investigation into MasterCard in April 2013 to assess whether the rules infringed EU regulations and, in 2015, sent the company a statement of formal allegations.
The investigation showed that, because of the MasterCard rules, merchants were forced to incur higher costs as a result of using the banking services necessary to receive payments made with a credit card.
This led to higher prices for merchants and customers, limited cross-border competition and artificial segmentation imposed on the single market.
The Commission concluded that MasterCard had infringed EU rules, even though the infringement ended as the company changed its rules in view of the entry into force of the exchange rate regulation.
However, it was decided to proceed with a fine for the behaviour of MasterCard which, having cooperated with Brussels in recognising the facts and the infringement, was granted a 10% reduction on the fine.
The solution to the fees with cryptocurrencies
Merchants and all other companies that have suffered from the negative consequences of MasterCard’s fraudulent practices could have used cryptocurrencies, benefiting from the “first mover” advantage, which would have allowed them to increase their acceptance of cryptocurrencies.
Transaction fees on the Bitcoin network are cheaper than credit card fees, which are often around 3%.
In addition, with bitcoin transactions, you can freely choose whether to opt for a higher or lower commission, depending on the speed with which you need the transaction processed.
In this regard, there is also to consider the existence of Lightning Network, with which you can perform micro-transactions that are not all immediately recorded on the blockchain.
The commission costs are drastically lower because the only time you pay the transaction fee on the blockchain is when the channel is created or closed.
Not even to say, many of the numerous security gaps in credit card transactions could be avoided through the use of the blockchain: chip cards have not overcome the vulnerabilities of credit cards whereas cryptocurrencies, which are virtually impossible to falsify, have been able to do so.
Finally, if it is true that using cryptocurrencies transaction fees become significantly lower and the settlement of transfers is instantaneous, the only problem for the trader is to hold an additional currency and expose themselves to the risks of volatility.