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Retailers call on the regulator to make card payments fairer as commerce shifts further online

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Retailers and hospitality businesses are calling on MPs to take urgent action to make card payments fairer. The call comes at a time when UK shoppers have used card payments more often to buy, both online and in-store, in order to stay safe during Covid-19. 

Trade bodies including The British Retail Consortium, British Independent Retailers Association (BIRA), Association of Convenience Stores (ACS), Federation of Small Businesses (FSB), and UKHospitality, say action must be taken immediately to deal with the high level of card fees charged by Visa and Mastercard. 

The call comes as the UK’s Payment Systems Regulator’s consultation on its five-year Strategy closes today. The group says that the national regulator – an independent arm of the Government, accountable to MPs – is failing to meet its statutory objectives.

Since the pandemic, British businesses and their customers used card payments than ever before, with more customers shopping online or paying by card in store. Cards now constitute more than 80% of UK retail sales, with Visa and Mastercard accounting for 99% of card transactions. According to the trade bodies, retailers spent £1.3 billion in 2020 to accept payments from their customers and they say these costs, equivalent to more than £46 per household, will be passed onto the consumer.

This is the second time that BRC, BIRA, ACS, FSB and UKHospitality has come together to make a similar call but says that as yet no action has been taken by the regulator. This time the trade associations are calling on Parliament and its Treasury Committee to intervene as a matter of urgency. Last year, the UK Supreme Court ruled that Visa and Mastercard interchange fees breached competition rules.

Now the trade bodies argues that the UK should not continue to allow such fees and the regulator must directly address anti-competitive card fees in its future strategy.


Andrew Cregan, head of finance policy at the British Retail Consortium, says: “Our national regulator is proposing vague and distant goals for tackling today’s payment problems and it’s far too little, too late. The Treasury Select Committee should conduct an appraisal of the PSR’s effectiveness and the value of this strategy.”

Jeff Moody, commercial director, British Independent Retailers’ Association said: “Following the UK’s departure from the European Union, the UK Government and its regulator have yet to address new opportunities for anti-competitive behaviour and abuse of the card schemes dominant market position in Europe’s largest card payments market. The PSR is tackling the area of future Payments but we also need to focus on the current payments issue where card-based transactions constitute at least 80% of retail payments today.”

When the PSR published its strategy, its managing director Chris Hemsley said: “Because payments are an essential part of daily life and a vital element in the UK economy, everybody should have a fair choice about how they make and receive them – and be protected when doing so. Our new strategy sets out how we are aiming to make this happen.

“We will continue our focus on promoting effective competition between the companies that offer payment services to people and businesses – including banks and building societies. But we will increasingly focus on how to make sure that the different payment systems themselves compete with each other: the current card systems; the existing and new ‘interbank’ systems; and any new payment systems that launch in the future. With healthy competition at each level comes new and exciting innovations, more choice for consumers and merchants, and possible savings for all of us in the products and services we buy.

“Our goal is to make sure payment systems are fit and sustainable for the future so that we can all use them with ease and confidence.”

The call comes at a time when Visa and Mastercard interchange rates are set to rise for merchants selling online. Earlier this year, Mastercard said that it would from October increase fivefold the fees that EU merchants pay when UK shoppers buy from them – from 0.3% to 1.5%, and Visa later followed suit with a similar rise. From October 19, Visa will charge 1.5% in interchange fees when consumers pay in a card-not-present transaction with an EEA business using a credit card issued outside the EEA, and 1.15% using a debit card. 

The rise follows the UK’s departure from the EU, since European rules that cap credit and debit card interchange fees at 0.3% and 0.2% respectively no longer apply to UK businesses. More recently PayPal said that from November it would charge a fee of 1.29% for some international commercial transactions between the UK and the EU, rising typically from 0.5%, following the UK’s departure from the EU. 

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