Regulators about to make a major ruling on interchange in Europe – watch this closely

Here's something that could have a big impact on how payment schemes are going to compete in the future.

European regulators are expected tomorrow to force MasterCard to cut interchange fees, according to Bloomberg and others. Those are the rough and bold headlines, but the devil’s in the details - everyone will be watching to see what the ruling actually says. The Bloomberg article jumped out at me among all the others today because it goes into a little more detail on what merchants are saying. There’s a little piece of information hidden near the bottom of the article which I think holds the real key to addressing interchange regulations.

“Ikea estimates that the fees cost the company 80 million euros a year. In the U.K., the retailer applies a surcharge for payment by credit cards to reflect the higher costs for these transactions. Customers have responded by using debit cards.”

That's the real answer!

Merchants already have a very viable solution in some countries, like the UK. Let them apply surcharges on card brands that are too expensive in relation to their value, in order to encourage customers to use cheaper payment methods. The card brands will respond either by reducing their fees on their own, or by adding value to their card products so that merchants want to accept them even if the fees are higher.

The only regulation needed is to allow merchants the ability to easily apply surcharges. There is no need for artificially setting interchange fees in a regulated manner like what was done in Australia.

Behind the scenes: How Maybank helped Nando’s fast food chain reverse rapidly decreasing sales

Launched in Malaysia in September 1998, Nando’s restaurant specializes in chicken-based menu items. At the beginning of 2006, it was hit by a severe drop in sales sparked by two key factors: the threat of bird flu and the oil crisis. Malaysians became reluctant to travel by car to eat the famous Nando’s Peri-peri chicken. Maybank saw an opportunity to help Nando’s.

"Maybank created a promotion for the Nando’s outlet in the Mid-valley mall, one of the largest in Kuala Lumpur," says Welcome's Pierre Boces. "It involved 12 awarding merchants located in the mall, including GNC, Dockers, Hush Puppies, and others. Nando’s was the unique redeeming merchant."

For every 50 ringgits (Malaysian dollars) spent with a Maybank card, in a single transaction, at one of the 12 awarding merchants, the Maybank cardholder received a coupon entitling him/her to enjoy a ¼ peri-peri chicken for only 99 sen (cents). The coupon could only be redeemed in Nando’s outlet at the mall. The promotion lasted two months, starting May 1st 2006. Tent cards were set up on tables and counters at Nando’s and each of the 12 awarding merchants. Maybank cardholders received fliers with their monthly statements and a billboard was displayed in the mall.

"The promotion was a success for Nando’s and the 12 awarding merchants," says Pierre. "Although Maybank cardholders had to spend 50 ringgits at any of the awarding merchants, they got a ¼ peri-peri chicken for only 99 sen– a saving of 14 ringgits. Customers came with their families and spent more than just 99 sen on a ¼ chicken. The average ticket size by Maybank cardholders at the 12 awarding merchants during the promotion was 50 ringgits – 42% higher than the average ticket size of 35 ringgits prior to the promotion."

"The promotion was a real win for Maybank," says Pierre. "Maybank was contacted by many other merchants at the mall, asking to take part in the promotion, either as an awarding or a redeeming merchant."

The average spend on Maybank cards at Nando’s climbed from 73 ringgits six months before the promotion to 101 ringgits during the promotion. It continued growing, thanks to the momentum of the campaign, and eventually reached 121 ringgits six months after the end of the promotion.

The case study can be downloaded here.

Behind the scenes: How Maybank and Baskin Robbins increased credit card usage for low value purchases

This case study should be of interest to anyone that wants to get merchants to encourage customers to pay by card rather than cash for low value transactions. It should be of special interest to people involved with contactless cards (even if this case study is not about a contactless deployment).

"Maybank wanted to see greater use of credit cards for everyday purchases, and Baskin Robbins wanted to encourage customers to spend more," says Welcome's Pierre Boces. "A promotion was designed to accomplish both objectives at the same time."

Maybank helped Baskin Robbins design a promotion which delivered an instant offer when customers paid with their Maybank card at Baskin Robbins. For every 20 ringgits (Malaysian dollars) in cumulative spending during the promotional period, consumers could buy a single junior scoop of ice cream for only 99 sen (cents), a big saving for Maybank customers.


Run by all Malaysian outlets of Baskin Robbins, the promotion lasted six months, from October 2006 to March 2007. It was advertised at Baskin Robbins outlets and in Maybank’s quarterly news letter, the Kard Shoppe, which cardholders get with their monthly statements.

The promotion was successful for both Baskin Robbins and Maybank. Coupons were redeemed at the rate of 53% while the average spending on Maybank cards at Baskin Robbins climbed from 36 Ringgits two months before the promotion to 58 ringgits two months into the promotion. It stayed at 59 ringgits two months after the end of the promotion.

Download the case study here.

Behind the scenes: How networking with other Welcome licensees helped Maybank quickly recruit Pizza Hut

Pierre Boces has released several case studies on how Welcome's bank customers are developing stronger relationships with merchants. He just did one about Malaysian bank Maybank and Pizza Hut.

"Maybank learned that another Welcome licensee, UBL in Pakistan, had done a promotion with Pizza Hut, and decided to approach Pizza Hut for a similar promotion for Maybank cardholders," he says. "Pizza Hut quickly agreed, and the promotion was launched."

Prior to the promotion, customers eating at Pizza Hut’s 129 Malaysian outlets were spending an average of 45 ringgits (Malaysian dollars) and making an average of two visits a month. Pizza Hut rolled out a simple and attractive “One, Two, Three, Free” promotion with the following mechanics:
1st visit - Spend 65 ringgits and get a coupon for 10% off the next visit
2nd visit - Spend 65 ringgits and get a coupon for 10% off the next visit
3rd visit - Spend 65 ringgits and get a coupon for a FREE Regular Pan Pizza

The promotion ran at all Pizza Hut restaurants in Malaysia and lasted three months, from September to November 2005. It was advertised on tent cards in each restaurant. Fliers were also sent to Maybank cardholders with their monthly statements.


The Pizza Hut promotion for Maybankard customers was the first of its kind in Malaysia, different from other credit card promotions that rarely help merchants target their best customers. The innovative nature of the promotion attracted substantial interest in the press.

During the promotion, Pizza Hut saw a monthly increase in the number of cardholders being rewarded and the number of coupons redeemed. Maybank saw a 49% boost in purchases by its cardholders at participating Pizza Hut outlets.

You can download the case study here.

Credit card surcharges in London

Dave Birch took this picture at a music shop near London. The store adds a 2% surcharge when customers want to pay with their American Express card.

His blog has these comments: "Since debit cards generally cost shops less than credit cards, why don’t the shops offer you money off if you pay with a debit card instead of a credit card? I wonder if it won’t get a bit confusing for customers when they get to the till in a shop and then have to start a mental calculus to determine which card to present."

Thanks for sending this to me Dave.