Market-wide digital euro fee caps beat merchant-specific limits
Market-wide fee caps for digital euro transactions are more robust and enforceable than individual merchant-level limits, according to a Banca d’Italia study. The authors recommend uniform average benchmarks alongside targeted fee exemptions for low-value payments.
Two tests for price ceilings
Nicola Branzoli, Stefano Pietrosanti and Alessia Vita evaluate digital euro merchant service charge models against two criteria: exogeneity and verifiability.
Under existing arrangements, European merchants pay an average fee of 0.50 percent for international cards, but small retailers pay up to four times more.
The study finds that a merchant-specific “no worse off” rule fails both criteria because payment service providers can strategically manipulate individual contract terms.
In contrast, a euro area-wide weighted-average cap established by public authorities is external to single contracts, prevents price rebundling and allows merchants to verify fee compliance at minimal cost.
Shielding micropayments from fixed fees
International card schemes handled 61 percent of euro-area card transactions in 2022, while 13 member states relied entirely on international networks.
Because merchant fees often include fixed per-transaction elements, low-value sales bear disproportionate acceptance costs.
The authors propose complementing market-wide caps with a targeted fee exemption for low-value payments.
Such an exemption remains fully exogenous, easy to verify from transaction logs and directly aids small retailers.
Uniform rules beat bespoke illusions
The paper exposes tailored merchant caps as a regulatory trap that preserves existing market inequalities.
Uniform market ceilings offer the only practical shield against strategic repricing by dominant intermediaries.
Without clear average benchmarks, mandatory digital euro acceptance will unfairly burden smaller merchants.