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MPs urged to tackle anti-competitive practices in card payments

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Cards now constitute more than 80% of UK retail sales. Photo: Reuters
Cards now constitute more than 80% of UK retail sales. Photo: Reuters

Businesses want parliament to take action against soaring card fees that are adding to the price of goods and services, at a time when the Bank of England has forecast 4% inflation by year-end.

A group made up of the British Retail Consortium (BRC), British Independent Retailers Association (BIRA), Association of Convenience Stores (ACS), Federation of Small Businesses (FSB) and UKHospitality said MPs must act immediately, as consumers and businesses rely on card payments now more than ever before.

Cards now constitute more than 80% of UK retail sales, and Visa and Mastercard have a stronghold on this: together they account for 99% of card transactions.

Visa and Mastercard have also said their interchange rates are set to rise roughly fivefold later this year for merchants selling online – going up to 1.5%.

The fees are paid by EU merchants when UK shoppers buy from them, and vice versa. The EU introduced a cap on such fees in 2015 after concerns they pushed prices up for consumers and unfairly burdened companies. But these caps no longer apply post-Brexit.

"Last year, the UK Supreme Court ruled that Visa (V) and Mastercard (MA) interchange fees are unlawful. The UK should not continue to allow such fees and the regulator must directly address anti-competitive card fees in its future strategy," the group representing UK firms said.

Read more: Contactless card payment limit in UK to jump to £100 next month

Many avoid cash because of fears it can transmit germs amid the pandemic. With lockdown restrictions, online shopping has also become extremely popular and also requires card payments.

Meanwhile retailers spent £1.3bn ($1.8bn) in 2020 to accept payments from their customers and ultimately these costs, equivalent to more than £46 per household, will be passed onto the consumer, the businesses have said.

The statement from businesses comes as the UK’s Payment Systems Regulator's consultation on its five-year strategy closed on Friday.

Businesses have said the national regulator is failing to meet its statutory objectives and that its new strategy delivers “very little.”

The organisations had come together to make this point last year as well but said no action has so far been taken.

“This time, the trade associations are calling on parliament and its Treasury Committee to urgently intervene,” they said. Nearly 40 cross-party MPs have already written to the regulator this year calling for robust regulatory measures on card fees.

“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," said Jeff Moody, commercial director at BIRA.

"The Payment Systems Regulator 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.”

PayPal (PYPL) also recently said it will introduced higher interchange fees from November. 

Watch: What is the budget deficit and why does it matter?

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