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Card costs rise to £150m a year

Bank debit and credit cards are photographed in this illustration picture at an office in Frankfurt, Germany, March 17, 2016.    REUTERS/Kai Pfaffenbach
The study showed soaring cross-border fees in countries on the bloc, with retailers in Italy, Germany and the Netherlands forking out more than £53m between them. Photo: REUTERS/Kai Pfaffenbach (Kai Pfaffenbach / reuters)

Retailers in the UK and the European Economic Area (EEA) are facing an increased estimated cost of £150m ($202m) a year to accept cross-border card payments.

Research by retail payments advisory firm CMSPI, in conjunction with the British Retail Consortium (BRC) and its members, revealed that British retailers alone are taking on an extra £36.5m, or £100,000 every day.

It said the rise was largely down to fee changes, which have risen up to 475% in some cases, after the UK left the European Union (EU).

Since Brexit, fees are no longer capped at the intra-regional rate, allowing major card brands to raise interchange fees on some online or “card not present” transactions.

The study showed soaring cross-border fees in countries on the bloc, with retailers in Italy, Germany and the Netherlands forking out more than £53m between them.

“These increased charges will add to existing cost pressures from rising commodity prices, labour shortages, and increased haulage and shipping costs, making it more challenging for retailers to absorb these new charges from card firms,” CMSPI said.

Read more: Amazon to stop accepting Visa credit cards issued in UK

It comes after a recent comment from Chris Hemsley, the managing director of the Payment Systems Regulator (PSR) at PayExpo, said “the absence of specific regulatory caps is not itself sufficient reason to increase particular fees, particularly if these increases are not obviously linked to costs. Such pricing behaviour poses real questions about how well this market is working.”

The BRC on Thursday called for the UK government and the PSR to take action to tackle soaring card fees.

CMSPI also estimated that new scheme fees will cost UK merchants £9.5m, and EEA merchants £20.8m, on top of previous rises which saw major card brands double their scheme fees between 2014 and 2018.

All these new fees exist on top of the £1.04bn per year that UK retailers spent to accept card payments in 2020, according to a BRC Payments Survey.

More than 80% of all retail spending in the UK now uses debit or credit cards.

Read more: FTSE under pressure as UK rising inflation bites

“Consumers and retailers on both sides of the Channel are on the hook for tens of millions in new card costs unless swift action is taken.” Andrew Cregan, payments policy adviser at the British Retail Consortium, said.

“At a time when retailers are facing rising costs across the board, from higher energy prices to soaring shipping charges, it is likely that some of these five-fold fee increases will eventually be passed on to hard pressed consumers.

“British merchants alone will pay an extra £100,000 every single day just to process cross-border transactions, holding back British exports to Europe.”

He added: “The government and the Payment System Regulator need to urgently intervene to reverse these spiralling charges on cross-border trade. Without action, it is consumers who will pay the price for the lack of much needed regulation.”

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