Interchange fees provide the basis for a balanced pan-European payment scheme by allocating costs in a transparent manner among all participants in the payment scheme. The announcement by MasterCard Europe of its fallback Maestro rates late last year was an important step towards moving SEPA forward. Banks may hesitate to continue to invest in SEPA while the European Commission debates what to do with interchange fees. While the European Commission still seems to believe that interchange fees should be reduced significantly, it is overlooking that zero or low interchange fee schemes are often based on price regulation, cross-subsidization or operating losses. Most importantly, these schemes do not deliver the competition throughout the value chain that SEPA aims to achieve. Consumers and business deserve to benefit from the well-developed and highly efficient payment services that SEPA would bring. The European Commission should therefore carefully consider the impact of its initiatives and the potential damage they can cause to the further development of SEPA. MasterCard Europe is very much part of the solution to a whole range of issues identified in today’s report. The European Commission’s focus should now be on creating a competitive European payments landscape and on fulfilling the Lisbon objectives to make Europe a leading economy by 2010. We look forward to continuing the constructive dialogue with the European Commission and other stakeholders on the issues covered by the report, to make sure that SEPA becomes a reality by 1 January 2008. louise_herbert@mastercard.com www.mastercardworldwide.com