April has two pieces of potentially good news for businesses and consumers accepting and using payment cards.
Firstly, the Payment Systems Regulator, the new economic regulator for the £75 trillion payment systems industry in the UK, became operational on 1 April. Its role is to ensure that payment systems are operated and developed in a way that considers and promotes the interests of all the businesses and consumers that use them. Its remit includes card payment systems and interchange fees – the fees that are paid between banks for the acceptance of card based transactions and deducted from the amount that is received by the business accepting the card payment. While consumers are often unaware of such fees, they cost retailers and ultimately consumers over £2 billion every year.
Secondly, on 20 April, at a European level, the Council adopted a Regulation capping interchange fees for payments made with debit and credit cards. This is known as the Interchange Fees Regulation (IFR) or the Multilateral Interchange Fees Regulation (MIF Regulation). The MIF Regulation will come into force 20 days after publication on the Official Journal and apply 6 months later. So, in just a few months’ time, cross border payments by credit card will be subject to a maximum fee of 0.3% of the transaction value and cross border payments by debit card subject to a 0.2% maximum fee. In addition, domestic transactions may be subject to lower caps (or a fixed rate for debit cards of no more than €0.05 per transaction). The cross border levels are in line with those already accepted by VISA and MasterCard in relation to competition investigations but the real potential for change here is that domestic rates may be lower.
The intention is that this Regulation will encourage competition and make it easier for new entrants to join the market, leading to broader availability of payment instruments. Transparency measures will mean retailers will be aware of the level of fees paid when accepting cards and allow businesses to more easily select which payment cards to accept. It remains to be seen whether these rules will result in lower prices for consumers.