The banks, including units of Citigroup Inc. and Banco Bilbao Vizcaya Argentaria SA, cut the commissions they charge one another to process credit card payments in February, and plan to reduce similar fees on debit cards in April, said Javier Lorenzo, who heads the market development committee of the Mexican Banks Association.

The banks have given up about US$200 million in annual revenue since the first cut in fees in August 2004, he said.

The savings will be passed on to shops and other businesses to benefit consumers, he said in an interview Thursday in the beach resort of Acapulco, where the nation´s bankers are gathering for an annual meeting.

Less than 5 percent of the nation´s shops and retailers accept credit or debit cards.

"These reductions will encourage more shops to accept cards, because their cost is being reduced," said Lorenzo, who is a deputy chief executive at Santander Central Hispano SA´s Mexican unit.

Lenders are lowering the so-called interchange fee - a component of the larger commission that shops and retailers must pay the banks to process card payments, which in Mexico can be as high as 4.5 percent of sales.

PRESSURE

The February reduction has brought the weighted-average interchange fee for credit cards to 1.84 percent from 2.16 percent a year earlier and 2.42 percent in August 2004, Lorenzo said.

For debit cards, the weighted-average interchange fee will fall to 0.81 percent in April from 1.53 percent in April 2005 and 2.63 percent in August 2004, he said. With the latest reductions, banks have agreed to forgo 1.06 billion pesos (US$97 million) in credit-card fee income annually and 1.2 billion pesos on debit cards since August 2004, Lorenzo said.

Central Bank Governor Guillermo Ortiz criticized the fees that banks levy on consumers and merchants at an annual meeting of bankers in Acapulco a year ago. Ortiz, 57, said the commissions curb efficiency and discourage debit and credit card use.

Foreign banks, which control almost 90 percent of Mexico´s banking system, charge more fees than they do at home, he said in a previous speech.

"Banco de México invited us to think over this issue and now I think we have an interchange fee structure that is better," said Jaime Guardiola, chief executive of BBVA´s Bancomer unit in Mexico, in an interview in Acapulco. "If Banco de México had not put pressure on us, would the banks have lowered these infrastructure costs? Maybe not."

LENDING OBJECTIVE

Ortiz´s role in forcing the banks to lower credit and debit card fees is part of an effort to boost lending in Latin America´s second largest economy.

For two years now, the central bank chief has repeatedly said the banks levy service fees on consumers that are too high and lend them too little.

Mexican bank loans to individuals and private companies totaled 896 billion pesos as of Jan. 31, equivalent to about 10 percent of gross domestic product. In Brazil, the ratio is 30 percent. Ortiz is scheduled to speak Friday in the Acapulco convention.

Marcos Martínez, president of the Mexican Banks Association, on Thursday said service fees have been declining as the volume of transactions and lending grows. Banks, which in Mexico normally levy a fee for cash withdrawals at their own ATM networks, are now charging 9.3 percent less for the service than two years ago, he said.