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News
MasterCard also provided the following historical federal Regulations E (consumer EFT transactions) and
context for the current debate: "In 2007, the Commission Z (truth-in-lending) to cover general-purpose, open-
issued a decision that prohibited MasterCard's cross- loop prepaid cards. The rules, which are expected to be
border interchange fees within the European Economic finalized in 2015, would not be applied to closed-loop
Area (EEA). In May 2012, the General Court rejected retailer cards (gift cards), provided retailers issuing the
MasterCard's appeal against the decision. In September cards operate physical locations where customers can
2014, the European Court of Justice confirmed the General obtain their prepaid gift cards.
Court's decision.
Merchants of all types and sizes have been embracing
"The European Commission announced on 9 April prepaid cards as a way to grow revenues and drive
2013 that it was launching a formal investigation into customer loyalty. In fact, many have begun aggressively
MasterCard's interchange fees with regard to payments selling prepaid, according to Aite Group LLC Senior
made by cardholders from non-EEA countries in the EEA. Analyst Madeline K. Aufseeser. "The number one reason
In addition, the Commission announced that it would be that U.S. merchants embrace prepaid cards is because
investigating rules on 'cross-border acquiring' and other the cards create revenue and increase incremental store
related business practices that may restrict competition." sales. Merchants may vary the types of prepaid cards they
sell, but their commitment to the product set is clear and
Multiple investigations evident," she wrote in a recent Impact Note.
"Many consumers use payment cards every day when CFPB impact on market
they shop for food, clothes or purchase anything online,"
said European Commissioner Margrethe Vestager. "We But can that commitment continue in the face of new
currently suspect MasterCard is artificially raising the regulatory strictures? The Network Branded Prepaid
costs of card payments, which would harm consumers Card Association and scores of others think not, and have
and retailers in the EU." blasted the pending CFPB proposals.
She went on to say that the EC is concerned about rules "The imposition of unnecessary compliance burdens,
MasterCard applies to cross-border transactions and the when trying to fashion a one-size-fits-all rule, could
fees retailers must pay to receive payments for MasterCard- ultimately limit consumer access to safe and reliable
branded payment cards issued outside of Europe. prepaid products and drive users to seek out riskier and
less consumer-friendly alternatives," the NBPCA wrote in
Vestager has led a series of high-profile anti-trust actions the comment letter it submitted to the CFPB regarding the
since taking office in November 2014, including reviews proposal.
of Google Inc., Amazon.com Inc. and Starbucks Corp. An
investigation of Visa Inc.'s inter-regional interchange fees Evidence already indicates that retailers are retracting
initiated in 2012 is reportedly still in progress. from open-loop card sales. When Aufseeser surveyed
merchants earlier this year she found 78 percent offer
Retail gift cards gain closed-loop gift cards, while 2 percent were planning to
do so by 2016. Only 27 percent are selling third-party,
open-loop gift cards; 53 percent sell third-party closed
loop cards. When she asked the same question in 2014, 89
ood news on the prepaid card front: after los- percent of merchants were selling third-party closed-loop
ing ground in 2013, retailer gift cards rebound- cards; only 74 percent were selling their own closed-loop
ed in 2014. Total dollars loaded onto retail gift gift cards.
G cards grew 9 percent last year, according to a
new report from Mercator Advisory Group. Prepaid cards – both open- and closed-loop – remain
popular with consumers. According to Mercator, which
"Closed-loop gift cards continue to be popular for retailers regularly sizes the prepaid market, 56 percent of U.S.
and their customers," said Ben Jackson, Director of adults purchased prepaid debit cards last year, up from
Prepaid at Mercator Advisory Group, and author of the 53 percent in 2013 and 47 percent in 2012. The cards are
report, Retail Gift Card Trends in the United States: 2014 in especially popular with younger adults: two out of three
Review. "Despite downward pressure in 2013, the market consumers between the ages of 18 and 34 purchased
rebounded last year, and customers showed their affinity prepaid cards last year, up from three out of five in 2013,
for closed-loop prepaid cards." Mercator reported in its December 2014 report titled
Consumers and Prepaid: Rising Use, Especially by Mobile.
Closed-loop card programs may also soon enjoy a
regulatory advantage over open-loop prepaid card Mercator said the two fastest growing segments of the
programs. The Consumer Financial Protection Bureau prepaid market last year were general-purpose reloadable
has been working on a set of proposals that would amend (GPR) and general-purpose non-reloadable cards.
12
MasterCard also provided the following historical federal Regulations E (consumer EFT transactions) and
context for the current debate: "In 2007, the Commission Z (truth-in-lending) to cover general-purpose, open-
issued a decision that prohibited MasterCard's cross- loop prepaid cards. The rules, which are expected to be
border interchange fees within the European Economic finalized in 2015, would not be applied to closed-loop
Area (EEA). In May 2012, the General Court rejected retailer cards (gift cards), provided retailers issuing the
MasterCard's appeal against the decision. In September cards operate physical locations where customers can
2014, the European Court of Justice confirmed the General obtain their prepaid gift cards.
Court's decision.
Merchants of all types and sizes have been embracing
"The European Commission announced on 9 April prepaid cards as a way to grow revenues and drive
2013 that it was launching a formal investigation into customer loyalty. In fact, many have begun aggressively
MasterCard's interchange fees with regard to payments selling prepaid, according to Aite Group LLC Senior
made by cardholders from non-EEA countries in the EEA. Analyst Madeline K. Aufseeser. "The number one reason
In addition, the Commission announced that it would be that U.S. merchants embrace prepaid cards is because
investigating rules on 'cross-border acquiring' and other the cards create revenue and increase incremental store
related business practices that may restrict competition." sales. Merchants may vary the types of prepaid cards they
sell, but their commitment to the product set is clear and
Multiple investigations evident," she wrote in a recent Impact Note.
"Many consumers use payment cards every day when CFPB impact on market
they shop for food, clothes or purchase anything online,"
said European Commissioner Margrethe Vestager. "We But can that commitment continue in the face of new
currently suspect MasterCard is artificially raising the regulatory strictures? The Network Branded Prepaid
costs of card payments, which would harm consumers Card Association and scores of others think not, and have
and retailers in the EU." blasted the pending CFPB proposals.
She went on to say that the EC is concerned about rules "The imposition of unnecessary compliance burdens,
MasterCard applies to cross-border transactions and the when trying to fashion a one-size-fits-all rule, could
fees retailers must pay to receive payments for MasterCard- ultimately limit consumer access to safe and reliable
branded payment cards issued outside of Europe. prepaid products and drive users to seek out riskier and
less consumer-friendly alternatives," the NBPCA wrote in
Vestager has led a series of high-profile anti-trust actions the comment letter it submitted to the CFPB regarding the
since taking office in November 2014, including reviews proposal.
of Google Inc., Amazon.com Inc. and Starbucks Corp. An
investigation of Visa Inc.'s inter-regional interchange fees Evidence already indicates that retailers are retracting
initiated in 2012 is reportedly still in progress. from open-loop card sales. When Aufseeser surveyed
merchants earlier this year she found 78 percent offer
Retail gift cards gain closed-loop gift cards, while 2 percent were planning to
do so by 2016. Only 27 percent are selling third-party,
open-loop gift cards; 53 percent sell third-party closed
loop cards. When she asked the same question in 2014, 89
ood news on the prepaid card front: after los- percent of merchants were selling third-party closed-loop
ing ground in 2013, retailer gift cards rebound- cards; only 74 percent were selling their own closed-loop
ed in 2014. Total dollars loaded onto retail gift gift cards.
G cards grew 9 percent last year, according to a
new report from Mercator Advisory Group. Prepaid cards – both open- and closed-loop – remain
popular with consumers. According to Mercator, which
"Closed-loop gift cards continue to be popular for retailers regularly sizes the prepaid market, 56 percent of U.S.
and their customers," said Ben Jackson, Director of adults purchased prepaid debit cards last year, up from
Prepaid at Mercator Advisory Group, and author of the 53 percent in 2013 and 47 percent in 2012. The cards are
report, Retail Gift Card Trends in the United States: 2014 in especially popular with younger adults: two out of three
Review. "Despite downward pressure in 2013, the market consumers between the ages of 18 and 34 purchased
rebounded last year, and customers showed their affinity prepaid cards last year, up from three out of five in 2013,
for closed-loop prepaid cards." Mercator reported in its December 2014 report titled
Consumers and Prepaid: Rising Use, Especially by Mobile.
Closed-loop card programs may also soon enjoy a
regulatory advantage over open-loop prepaid card Mercator said the two fastest growing segments of the
programs. The Consumer Financial Protection Bureau prepaid market last year were general-purpose reloadable
has been working on a set of proposals that would amend (GPR) and general-purpose non-reloadable cards.
12
