The credit card market is strictly regulated
ComCo is intervening in a fully functioning market
The Competition Commission (ComCo) already obligated Swiss card issuers to reduce the interchange fee in Switzerland (Domestic Interchange Fee) gradually by 24% in 2005. Another reduction of 15% was decided on again in 2009. More regulations are likely.
Merchants compensate issuers for services that they provide for the credit card system to work with the interchange fee.
Swisscard AECS GmbH expects the ComCo to check whether the measures previously taken have had the desired effect, namely a positive effect on the national economy to the benefit of consumers, before introducing more regulations.
A study by the University of St. Gallen provides a sound, scientific basis for the first time for analysis in terms of competition law and regulation of the Swiss credit card market, if applicable.
The results of the study show that the need to regulate the Swiss credit card market has not been scientifically proven because there is no systematic market failure. In addition, the study shows that regulation is questionable in its current model.
Study by the University of St. Gallen: «Swiss credit card market»
As part of a study, three Professors of Economics and a lawyer analyzed the impact of regulation on merchants, banks and consumers in Spain. They come to the conclusion that the reduction disturbed the essential balance on the payments market and damaged the majority of participants. In particular, consumers are threatened by disadvantages if this kind of regulation should also happen on other markets.
Study by the Universidad Rey Juan Carlos, by the Universidad Autonoma de Madrid and Universidad National de Education a Distancia: “The consequences of the statutory reduction in multilateral interchange fees in Spain”
Well developed consumer protection in Switzerland
Switzerland has well developed consumer protection in the consumer credit and card credit sector: Credit cards with installment facility are subject to the Consumer Credit Act. Swiss law is considered to be strict compared to Europe.
Careful checking of credit card applications
Swisscard checks every application based on the statutory required criteria as well as according to standard industry and company-specific criteria that are based on experience and profitability targets. Swisscard then decides whether to issue a credit card.
The following are mandatory by law:
- Copy of official identification
- Identification of beneficial owner who is responsible for the assets used to pay the credit card statements. This information is to prevent money laundering.
- Creditworthiness check at Consumer Credit Information Office
- Applicant’s age: The applicant must be at least 18 years old.
Standard industry checks include among others:
- Checking the information provided about the applicant’s financial situation
- Checking the information provided on the card application, for example address, age and phone number
- Obtaining information from the Central Office for Credit Information