UK shoppers buying from the EU will now be charged five times as much as they were before Brexit in credit card “interchange fees”.
Mastercard announced today that from October 15 it will dramatically increase interchange fees for UK customers now that transactions with the EU are deemed “inter-regional”.
Mastercard collects an interchange fee on behalf of banks every time a transaction is made using its cards, a small fee which is used to cover the costs of things like fraud prevention and systems maintenance to keep its card payment network running smoothly.
In 2015, the EU introduced a cap on interchange fees at 0.2 per cent of the transactions amid fears these hidden fees were costing both retailers and customers hundreds of millions of Euros.
However, now the UK has officially left the European Economic Area, these fees are no longer capped at 0.2 per cent, and will rise to 1.15 per cent for every online debit card payment.
Online credit card payments will also rise from 0.3 per cent of transactions to 1.5 per cent.
While this fee will initially be incurred by retailers, they will likely choose to pass this cost increase along to customers making it all the more expensive to buy good from the EU.
“This smacks of opportunism and I would urge the regulators to step in as a matter of urgency to ensure that financial institutions do not use Brexit as an opportunity to hike up costs that consumers will ultimately bear,” chair of the all-party parliamentary group Fair Business Banking Kevin Hollinrake told the Financial Times.
The Coalition for a Digital Economy’s head of policy Joel Gladwin added: “Some people might put this change down to Brexit, but it is actually just greed. It is well within the power of the card schemes to make merchants’ lives easy and keep things operating as they were pre-2021.
“Not only does this hurt the already squeezed bottom lines of ecommerce start-ups and subscription businesses, it comes at a time when a huge number of small businesses have shifted to online models to survive.”
Mastercard said these changes were in line with levels it had agreed with the European Commission for transactions from all non-member areas in 2019.
Mastercard said the changes were designed to bring interchange rates in line with levels it had agreed with the European Commission for transactions from all non-EU areas in 2019.