Italian Bank Ditches Card Fees For Small Payments

August 21, 2023
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Banco BPM, Italy’s third-largest bank by assets, has announced that it will scrap commission fees for low-value card payments, after banks and trade groups signed an agreement to help struggling merchants.

Banco BPM, Italy’s third-largest bank by assets, has announced that it will scrap commission fees for low-value card payments, after banks and trade groups signed an agreement to help struggling merchants.

From October 1 through to June 30, 2024, the bank will reimburse merchants for the full merchant fees they paid for low-value card payments on domestic card network PagoBANCOMAT.

This will apply to transactions of less than or equal to €10.

The measure will automatically apply at all points of sale (POS) terminals for both existing customers and those joining during the discount period, Banco BPM said in the announcement.

The new initiative aims to “curb commissions charged to companies while encouraging the digitisation of payments and the further growth of electronic payment methods for small-value transactions”, Banco BPM said.

The bank added that it is considering adopting similar measures for card payments on international rails, which will complement its future initiatives to increase the transaction volumes of its customer base.

The bank’s payments business currently includes more than 140,000 POS, more than 4m cards and a total annual transaction volume of more than €30bn.

The announcement comes on the heels of a memorandum of understanding signed by Italian banks and business associations to mitigate the costs of accepting electronic payment instruments.

The agreement was a result of six months of negotiations after which banks agreed to significantly reduce the commissions for transactions below €30 and to move towards zeroing the commissions for transactions below €10.

Banco BPM said its initiative falls within the scope of this agreement, which it has adhered to.

It also follows a previous initiative between it and Bancomat whereby, since 2021, fees have been scrapped for payments under €4.99.

Banco BPM positioning for the future

The announcement comes as Banco BPM is making a strategic move to strengthen its position in the payments market.

In mid-July, Banco BPM signed a strategic partnership with BCC Iccrea and FSI to create a single platform for financial technology,which can generate “important economies of scale” on the investment side.

According to the announcement, the joint venture will be the second-largest national operator with a market share of more than 10 percent in payments, with around 9m payment cards, 400,000 POS and around €110bn in transacted business volumes.

Banco BPM will have the exclusive right to distribute the joint venture's issuing and acquiring offer catalogue.

Under the terms of the deal, Banco BPM will be able to keep its current commission margins generated by its payments business, which accounted for more than €140m in its net revenue in 2022.

The costs of accepting card payments are an increasingly heavy burden for merchants in Italy, which has come to the attention of politicians.

Earlier in August, Isabella Adinolfi, member of the European Parliament (MEP), told the European Commission that credit and debit card acceptance incurs considerable costs, and is “taking a toll” on small and medium-sized enterprises.

That financial burden could not only hamper Italian businesses but may also give competitors an edge, especially if they are based in member states with lower processing fees, the MEP said.

Previously, Prime Minister Giorgia Meloni was considering measures to help merchants by enabling them to refuse cards for purchases below €60.

The plan was, however, scrapped after backlash from the country’s central bank and the European Commission.

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