Memorandum of Understanding details the common approach of some EU national regulators to monitoring the separation of card schemes and processing units under the IFR

By Adrian Calvo, Trystan Tether, Guadalupe Sampedro, Scott McInnes, José Luis Lorente Howell, Cathie Rosalie Joly, Dr Michael Jünemann, Karen Berg, Stefano Febbi, Hans Svensson, Kristiina Lehvilä, Konrad Siegler, Ivan Sagál, Slawomir Szepietowski, Annette Nielsen


Regulators in eight Member States (Belgium, Czech Republic, Denmark, Finland, Italy, Lithuania, Netherlands, UK) have entered into a memorandum of understanding (MoU) which aims to develop a consistent approach to monitoring compliance with Article 7(1)(a) of the EU Interchange Fee Regulation (IFR), which requires the separation of a payment card scheme and processing units.


Article 7(1)(a) of the IFR requires that payment card schemes and processing units should be independent with respect to accounting, organisation and decision-making processes. Regulatory Technical Standards 2018/72 (the RTS), which came into force on 8 February 2018, specify more detailed rules as to how this separation must be implemented.

Domestic four-party card schemes, which by definition operate in only one EU Member State, are subject to supervision by only one national regulator, and there is therefore no risk of conflicting enforcement by different national regulators[1].

However international four-party card schemes (whether traditional ones such as Visa and Mastercard, or three-party cards schemes such as American Express that are treated as four-party card schemes under the IFR) operate in multiple EU countries, but can only organise their businesses in one way across the EU. Although Article 7(2) IFR provides that "The competent authority of the Member State where the registered office of the scheme is located may require a payment card scheme to provide an independent report confirming its compliance with paragraph 1", the IFR does not give exclusivity in the enforcement of Article 7(1)(a) to that authority. This means that international card schemes are subject to enforcement by each and every national regulator, and there is therefore the risk of conflicting enforcement in different EU Member States. It was therefore considered necessary for national regulators to take a common approach to monitoring compliance with Article 7(1)(a). The MoU aims to reduce the risk that payment card schemes are subject to potentially contradictory directions from national regulators.

Although at this stage only eight national regulators have entered into the MoU, it is expected that other Member States will participate in the MoU in the future.

Content of the MoU

The most significant development introduced by the MoU is that it permits national regulators to appoint a 'Lead Competent Authority' (Lead CA) in relation to a specific payment card scheme for a two-year period. The lead regulator will be responsible for co-ordinating the monitoring of the relevant payment card scheme by, in particular:

  • communicating with the payment card scheme;
  • determining what information to request from the payment card scheme;
  • collating the views of national regulators as to the payment card scheme's compliance and any recommendations to the card scheme to ensure compliance with Article 7(1)(a).

The appointment of a Lead CA in relation to a payment card scheme will bring welcome clarity to the monitoring of compliance with Article 7(1)(a). It should be noted, however, that each regulator remains solely and fully responsible for performing its duties under the IFR and under applicable national laws, and therefore the MoU does not limit the ability of each national regulator to act unilaterally, as applicable laws permit, in fulfilment of its functions under the IFR. 

It appears likely that the Lead CA for a payment card scheme will be the regulator of the Member State in which the payment card scheme has its main base of operations. In the case of Visa and potentially American Express (assuming it should be considered as a four-party scheme for the purposes of Article 7 IFR), with European headquarters in London, the Lead CA is expected to be the UK Payment Systems Regulator (PSR) – although see our comments below on the implications of Brexit. In the case of Mastercard, with European headquarters in Waterloo, Belgium, it is expected that the National Bank of Belgium (NBB) will act as the Lead CA.    

In addition, the MoU states that payment card schemes should expect two phases of monitoring. The first phase will be the initial assessment of compliance by a payment card scheme, and the second phase will include an annual self-declaration of compliance made by the payment card scheme.

Implications of Brexit

The UK Government has issued draft amendments to the IFR (and delegated legislation) which will ensure the IFR functions effectively if the UK leaves the EU in a no deal scenario. The draft amendments transfer responsibility for drafting the RTS from the European Commission to the PSR (which has issued consultation paper CP18/3 on the necessary amendments to the RTS – see our client alert available here on this development).

Whilst the PSR is currently amending the RTS purely to ensure they function effectively after the UK's exit from the EU, there is obviously the potential for the UK government to amend the RTS for policy reasons. This may mean that the UK withdraws from the MoU if the divergence results in substantially inconsistent laws in a no deal scenario. On its webpage announcing the MoU, the PSR stated that it was considering its participation in the MoU 'in light of ongoing EU withdrawal negotiations'.

Another consequence may be that national regulators refuse to appoint the PSR as a Lead CA if they fear that the PSR will withdraw from the MoU in the near future.

[1] Examples of domestic four-party card schemes: Cartes Bancaire in France, girocard in Germany, Pagobancomat in Italy, Dankort in Denmark, BankAxept in Norway, Multibanco in Portugal.