Changes to the structure and operation of the payment card market

On 18 December 2014, the Competition Authority announced that Arion Banki, Íslandsbanki, Landsbankinn, Borgun and Valitor had each entered into a settlement with the Competition Authority regarding its investigation into restrictive practices in the payment card market. The accompanying decision discusses the settlements and the case on which they are based.

In the settlement, the above-mentioned companies acknowledged that a certain practice in the payment card market had not been in accordance with Articles 10 and 12 of the Competition Act and Article 53 of the EEA Agreement. The companies agreed to implement extensive measures designed to enhance competition. They also agreed to pay fines totalling 1,620 million króna.

The agreements underlying the decision will lead to fundamental positive changes in the structure and operation of the payment card market. Their main purpose is to promote increased efficiency in payment card services by creating the basis for stronger customer oversight, and to promote a level playing field for competitors in the areas of transaction acquirer and payment card issuer services, reduce the risk of conflicts of interest in the activities of financial institutions in the payment card market and otherwise promote more effective competition in the field of card issuance and transaction processing

The changes include, among other things, a cap being placed on the so-called interchange fee, which is a commission paid to banks via acquirers from merchants (e.g. shops). Furthermore, measures are being taken to promote greater transparency in the charging of payment card services and increased efficiency in this area. Furthermore, Valitor and Borgun have agreed to separate their issuance and acquiring services, as the co-operation of these business areas has created barriers to competition for other competitors in the payment card market. Furthermore, the practice of competitors in the commercial banking market jointly owning a payment card company has been abandoned, as this arrangement has not proven successful from a competitive standpoint. At the same time, it is ensured that Valitor and Borgun provide services to parties other than their owners on an equal footing.