In an article at Payment Source, we read that merchants “renounce credit cards following EU surcharging ban.” The story cites the PSD2 requirement to ban credit card surcharging. Instead of allowing merchants to charge their standard fare, plus a little extra to cover the cost of payment acceptance, some entities, including Her Majesty’s Revenue and Customs Office (the UK equivalent of the US Treasury’s Internal Revenue Service) disallowed the use of credit cards altogether.
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Several U.K. businesses have shifted their stance on credit card acceptance in the wake of a new EU law that became effective Jan. 13 — with some providers putting an end to their credit card acceptance altogether.
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Other merchants have tacked on an across-the-board service charge to all customers—regardless of how they pay; and still others have raised prices or are likely to do so to help defray the added costs they are now shouldering since they can no longer pass on the cost of credit card transactions to customers.
The battle between merchants and credit card networks is almost as old as the 50-year-old card business. Mastercard and Visa are private payment networks who own the technologies that drive the business. They franchise to financial institutions who issue enabled cards. In some markets, such as U.S. debit, price controls govern interchange rates. Europe and Australia are similar.
Although cost controls are often poised as savings for consumers, as far as I am aware, it has never been proven that consumers receive the benefit; it seems the savings go into retailer profits.
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Nonetheless, there’s precedent for countries around the world changing their policies related to credit car, surcharging, and some industry participants hope the U.K. will ultimately follow that lead.
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“When merchants pass on the credit card fee, they inform consumers about the cost of using credit cards and give consumers the incentive to switch to a lower-cost form of payment, like debit or check, when the transaction cost becomes too high. This makes payments more transparent and fair for everybody,” he says.
It will get even messier in Europe as Brexit gains steam. For a deeper dive, give our recent view on PSD2 a read. You are probably saturated with reading about GDPR so it might be refreshing!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group