Banks push for plastic

TALLINN - Estonian lenders, including local units of Swedbank and SEB, may cut fees on card payments, in line with the competition watchdog, after banks in neighboring Latvia were fined for operating a price cartel, reports Bloomberg. The banks have started talks to reduce commissions they charge from each other on card payments in case the merchant that receives a card payment is served by a different bank than the one that issued the card, officials from Swedbank and SEB said in e-mailed statements on March 29.

Estonia’s Competition Board said on March 22 the banks need to accelerate the reduction of such commissions, which make up a “significant” part of service fees charged from the merchants and affect mark-ups by the merchants.
The Estonian system is based on bilateral agreements between the banks, as opposed to more common multilateral agreements such as in Latvia. Still, the watchdog is “not fully” convinced the Estonian practice, similar to the one in Sweden, significantly improves the competitive situation. The board is due to give its final opinion after the banks have agreed on new fees.

Latvia’s Competition Council fined 22 lenders about 5.5 million lats (7.8 million euros) for colluding on the price for bank-card transactions and the use of automated teller machines, it said in a statement on March 18.
 The rising share of card payments in Estonia reduces the cost for each transaction, which allows interbank commissions to be reduced and, in turn, lower the fees charged from merchants, Ulla Ilisson, the head of the Estonian retail banking unit at Swedbank, said in a statement.

Card-transaction fees have declined by more than 30 percent over the last five years, she said, citing the local banking association. Swedbank is working on lowering maintenance costs for the card payment system and prices for merchants, she said.

SEB wants other lenders to consider subsidizing card payments as lower cash circulation benefits the whole society, Eerika Vaikmaee-Koit, the head of Estonian retail banking and technology at SEB, said in an e-mail. SEB will reduce its monthly fees on card terminals for small entrepreneurs to 5 euros, from 27 euros, she said.
Estonians made 47 percent of all payments via debit or credit cards last year, compared with about 70 percent in Finland and Sweden, according to Swedbank.

The banks charge merchants 1-1.5 percent on card transactions and “even more” on Amex card payments, Marika Merilai, the managing head of Estonian Merchants’ Association said on March 22. Such fees “aren’t objective and severely restrict competition in retail,” she said.