The European Interchange Fee Regulation (IFR), which was introduced at the end of 2015, was proclaimed as a victory for merchants combating unfair interchange fees. This new regulation imposed limits of 0.2% and 0.3% of the transaction values on debit and credit cards respectively and it was estimated that this could save merchants in the UK up to £650 million per year.
However, this now seems unlikely as a number of ‘replacement’ fees are steadily being introduced. In addition, some cards, like MasterCard and Visa commercial, are currently exempt from the IFR and this, along with ‘replacement’ fees, is likely to ensure that many merchants may see little or no difference in the charges.
Primarily it seems that the savings are unlikely, intentionally or not, to be passed on to the merchants in full as was observed when IFR was introduced in the US and Australia. Indeed, there is evidence to show that previous attempts to reduce charges have not made it through to the merchants in their entirety.
These failures, to pass on the IFR savings, are many but the main one is complex pricing, especially with blended pricing where all the transaction fees are bundled into one charge. This can make it difficult to ascertain whether the IFR reductions have been passed on to the merchant. Alternative and more transparent pricing structures are intended to be introduced this year, however it is possible that these may be just as difficult to understand, especially with the new range of ‘replacement fees’ contributing to the confusion.
The forthcoming purchase of Visa Europe by Visa Inc. is another possible setback. Visa Inc., unlike the ‘not for profit’ Visa Europe, is a company driven by profits and with four to five times the profits of Visa Europe the future of Visa charges is uncertain
Therefore, the IFR introduction works both ways and where it has created savings merchants must be on their guard to ensure they receive them, Conversely, it has also created the opening for the introduction of additional fees which may reduce or remove those savings completely.
To ensure that you get the best pricing structure it is crucial that you seek out the best deals by shopping around.
By GCMA
