Andorra to cap interchange fees for card-based payment transactions


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The Government of Andorra is passing a bill to cap the maximum percentage that can be charged for interchange fees on card-based payment transactions. The Law on interchange fees for card-based payment transactions will standardise bank commissions for operations carried out in Andorra and reduce costs for online and offline businesses.

Table of Contents:

    1. Law on interchange fees for card-based payment transactions

      Capping the fees applied to card payments

      What are interchange fees?

      A measure that will help commerce

      E-commerce growth

      A diversified and innovative economy

Law on interchange fees for card-based payment transactions

Last May, a bill was passed that will regulate and standardise bank commissions for card-based payment transactions in Andorra. Currently, banks and other payment service providers can apply the percentage for commission that each operator deems appropriate to businesses and other services that use this method of payment with their customers and users.  The aim of this bill is to cap interchange fees to a maximum percentage so that all transactions have the same cost across all types of card. In turn, users will also save money. These fees currently range from 1% to 2%, and the aim is to reduce the current level of interchange fees to 0.2% of the transaction value for debit cards and 0.3% of the transaction value for credit cards. This charge has an impact on the costs borne by businesses, which could be reduced by up to 22%.

Capping the fees applied to card payments

The Law on interchange fees for card-based payment transactions will come into force on 1 November to give operators six months to align their systems with the new requirements. It affects all credit and debit card transactions at physical, online and mobile terminals where both the payment service provider and the point of sale are located in Andorra. The maximum percentage is the same as that of European Union Regulation 2015/751, applicable in the European Economic Area.

This law has no effect on cards that were not issued in Andorra or the European Economic Area. Nor does it apply to other transactions such as those carried out with company cards or cash withdrawals from an ATM or an operator’s branch.

What are interchange fees?

These are commissions paid by Andorran banks to card issuers for each card-based payment transaction. The banks pass on this cost to shops and businesses that use credit or debit card payments. These fees can increase the final price of the product for the consumer, and not only for card users, since merchants usually cover these fees with the price of their goods and services. 

A measure that will help commerce

The limitation on the percentage for fees on card payment transactions aims to ensure that Andorran commerce can maintain its competitiveness and offer attractive prices.

The government has introduced this measure to help businesses cope with the COVID-19 crisis, allowing them to make a saving of up to 22% on costs. The law will be applied from 1 November, coinciding with the start of the ski season, which is considered high season and is when the largest number of tourists come to the country for skiing and shopping, among other activities.

E-commerce growth

This measure will also help e-commerce, where the vast majority of payments are made by card. Remember that e-commerce has grown significantly in the last year and a half due to the pandemic. In Europe alone, online shopping grew by 27% in 2020 and e-commerce has been one of the few sectors that has seen growth this year. In Spain, it increased by 53% with a turnover of 53 billion euros, compared to 20 billion euros in 2019. According to the Spanish National Commission for Markets and Competition (CNMC), 61% of purchases were made outside the Spanish territory.

With e-commerce increasing, Andorra must not get left behind with disproportionate costs that make the price of the final product more expensive.

A diversified and innovative economy

Andorra is implementing measures like this to help the established business framework in the country. But the goal is also to build a competitive country with affordable costs that will attract new sectors and markets and help diversify the economy. These and other measures are part of the strategic plan Horitzó 23, Andorra’s economic plan for meeting the challenge of COVID-19 recovery, which was unveiled last year. We devoted an article to it in our blog.

One of the main objectives of this programme is to implement measures to encourage the creation of digital and e-commerce businesses so that tech-sector investors see Andorra as an attractive option for both investment and residence. Another important point of the plan is simplifying the procedures for creating a new company or digitalising administrative processes. To this end, new online portals have been created that allow some tax returns to be filed online. Thanks to a positive reception, the expansion of this service to other taxes is already being planned. We explained all this in detail here.

In short, the Law on interchange fees for card-based payment transactions, which will come into force on 1 November this year, will standardise the percentage that is applied to each transaction made with this payment method. In addition, it will reduce a part of the costs assumed by Andorran businesses for charging by card, which should then be reflected in the final price of their products. At the same time, Andorra continues working to adapt to the changing times and to be a competitive and attractive country to settle in.