The European Commission has proposed new rules on payment services, and regulation on interchange fees for card-based payment transactions for the benefit of consumers and retailers.

The authority has capped the charges at 0.2% of the value of the transaction for debit cards and 0.3% for credit cards, which will be first practiced for cross-border transactions duing a transition period of 22 months.

After the transition period, the caps will be applied to domestic transactions also.

In addition, the commission has adopted a new payment services directive (PSD2) for secure use of low cost internet payment services between the retailer and the purchaser’s bank.

PSD2 is also expected to protect consumers against fraud, increase consumer rights and promote the emergence of new players and the development of innovative mobile and internet payments in Europe for sake of EU competitiveness worldwide.

For the cards that are not subject to the caps, retailers will be able to surcharge for them or to refuse to accept them.

EU Internal Market and Services Commissioner Michel Barnier noted that the payment market costs about €130bn a year, representing more than 1% of EU GDP and termed it as ‘fragmented and expensive’.

"These are costs our economy cannot afford. Our proposal will promote the digital single market by making internet payments cheaper and safer, both for retailers and consumers," noted Barnier.

EC Vice President Joaquín Almunia said: "A level playing field will be created for payment services providers, new players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices."