What are the Brexit fee increases?
Following the UK’s exit from the European Union, the global card schemes began to reclassify the market as ‘inter-regional’ (as opposed to intra-EEA) for the purpose of certain card transactions. From 22nd April, online Mastercard transactions are expected to see their fees increase from 0.2% to 1.15% and 0.3% to 1.5% for debit and credit card payments, respectively. Whilst the change has already been implemented for EEA merchants faced with UK-issued cards, the new fees are expected to impact UK merchants directly – just as international travel opens up, and the ecommerce boom looks set to stay.
What about interchange regulation?
Whilst the EU’s 2015 Interchange Fee Regulation (since transposed into UK law) covers transactions made within the EEA, inter-regional transactions fall out of its scope. These payments are covered by separate agreements secured later between the global card schemes and the European Commission², which limit ‘card not present’ interchange fees to 1.15% for debit, and 1.5% for credit transactions.
What can merchants do?
The first step for every merchant is ensuring that these ‘pass-through’ fees are applied correctly. Acquirers handle billions of transactions every day, applying numerous interchange categories across each payment according to variations in regional classification, card type, payment channel, and more. That’s without considering the scheme fees, acquiring rates, and ancillary fees each card payment attracts. Now more than ever, we see these fees passed through incorrectly. Whether a rounding error or a misapplied fee, pass-through complexities can add up to millions in additional costs for enterprise retailers.
Secondly, the changes make it more costly than ever to settle for sub-optimal acquiring arrangements; in those areas merchants can negotiate, opportunities to mitigate losses – either through improved solutions or reduced costs – make all the difference.
But these approaches represent damage control. In the longer term, many are looking to the UK’s Payment Systems Regulator for action, who recently announced that they would be ‘considering the impact of recent changes’ to scheme fees and cross-border interchange fees as part of their 2022/23 plan.³