UK Proposes Capping Some Visa, Mastercard Fees (bloomberg.com) 63
Regulators in the UK are weighing a cap on some of the fees that Visa and Mastercard charge local merchants for each card transaction, seeking to rein in charges that have risen fivefold since Brexit. From a report: After a monthslong review, the UK's Payment Systems Regulator said it's concerned that the payment giants have no effective competition, especially when it comes to the interchange fees they charge UK merchants when a consumer carrying a card issued by a bank in the European Economic Area makes an online purchase.
For now, the PSR is proposing to restore those fees to the pre-Brexit levels of 0.3% of a purchase price for credit cards and 0.2% for debit cards. For credit cards, those fees have risen in recent years to as high as 1.5% and the PSR estimated that the increases cost UK businesses as much as $250 million last year. The two companies have been under fire from a bevy of regulators and lawmakers around the world for the fees they charge. While it usually amounts to just pennies per purchase, the fees do add up: US merchants spent a record $160.7 billion on swipe fees last year, up 16.7% from 2021, according to the Nilson Report, an industry publication.
For now, the PSR is proposing to restore those fees to the pre-Brexit levels of 0.3% of a purchase price for credit cards and 0.2% for debit cards. For credit cards, those fees have risen in recent years to as high as 1.5% and the PSR estimated that the increases cost UK businesses as much as $250 million last year. The two companies have been under fire from a bevy of regulators and lawmakers around the world for the fees they charge. While it usually amounts to just pennies per purchase, the fees do add up: US merchants spent a record $160.7 billion on swipe fees last year, up 16.7% from 2021, according to the Nilson Report, an industry publication.
Won't matter.... (Score:2)
Re:Won't matter.... (Score:4, Interesting)
It is still a good idea to target specific business practices where the market is not able to efficiently punish for bad behavior. Every business effectively needs to accept all major credit card vendors or else they will lose customers. They have no ability to negotiate with the vendor unless they are a very large enterprise. This is a good place for the government to step in. If the banks move those fees over to other services, or choose to reduce credit card consumer rebates to compensate for lower fees, they will face greater competitive pressures. They cannot just magically move those fees elsewhere without consequences to their business. That is a good thing.
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It is still a good idea to target specific business practices where the market is not able to efficiently punish for bad behavior.
Sounds appealing. But put yourself in the shoes of Visa. How are you going to react? I can imagine a number of ways: raising interest rates, delaying reimbursements (so they hold on to cash longer), increasing member fees, reducing reward points, reducing staffing at call centers, and probably a hundred other things. Are you really sure that's a better situation?
I'm quite sure regulators are pushing a rope. Setting price ceilings never works in the end. If they think credit card companies are making too muc
Re:Won't matter.... (Score:5, Insightful)
There is a very simple answer. Make it illegal for a payment processor to have a contract that locks down how the merchant runs their business. The credit card companies have this power because the merchant can't charge the client the card fees. It should be illegal for the credit card company to demand the same terms as a cash paying client who doesn't impose these extra fees.
Re: Won't matter.... (Score:2)
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There is a very simple answer. Make it illegal for a payment processor to have a contract that locks down how the merchant runs their business
"For every problem there is an answer that is clear, simple, and wrong." (variously attributed to H. L. Mencken, Mark Twain, and many others).
Whoever said it is not wrong. If you think there's a simple solution to a problem in a billion dollar market, I assert you don't appreciate the complexity of the situation. I can point out at least one: if credit card companies can't put that clause in contracts, I'd expect them to immediately alter other terms of the contract. I mean, why wouldn't they?
I think it's s
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They are wrong. The only way that they can charge the fees is by restricting the competition. It's a simple solution that is fixed by increasing the competition. removing the restrictions.
BTW. nothing in your statements back up your assertion. Just remember the KISS principal it works all the time.
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I see you haven't read a merchant agreement.
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Incorrect, afaik the merchant has two choices: Accept the card, or don't.
I have used a "merchant" who offers a 10% reduction if you pay cash. I discovered this when paying cash, they don't advertise it.
Re:Won't matter.... (Score:5, Insightful)
>> Slap a fee on them and they'll just add it somewhere else.
Better to have it be a visible fee so the customer knows who to blame, than a hidden one.
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Indeed, EU forced fees for creditcards to be lower and the creditcard companies just slapped it on the UK and US. Where do you propose Mastercard would slap on extra fees inside the EU? If they had done that (they didn't) they would see the wrath of anti trust authorities. Mastercard is free to leave Europe if they don't like it of course.
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Slap a fee on them and they'll just add it somewhere else.
I hate this defeatist logic because it's just silly. If they can slap a fee somewhere else they will do it right now.
fees and interest rates (Score:2)
Re:fees and interest rates (Score:5, Insightful)
If they pass legislation that only affects one aspect of the card company's fee structure then the fees will just increase somewhere else, probably higher late fees, higher interest rates, maybe more annual fees. Too bad they're unable to create any real competition, that would be a better solution.
If they increase fees that target the credit card holder, or reduce rebates like cash back, then they will face real competition. If my credit card company reduced my cash back or added an annual fee, I would shop around. I have much more flexibility to shop around for a new credit card than businesses have flexibility to choose which credit card merchants to accept. I lose nothing when moving to a new credit card, but businesses risk losing customers if they don't accept Visa or Mastercard.
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You realize that your "cash back" incentive is really funded by the swipe fees that are being regulated here, right? That's a major source of revenue for the card issuers.
This story is about the UK, where I don't know the current status, but in the US there is no legal limit [suntimes.com] on swipe fees for credit cards (there is for debit cards: 21 cents plus 0.05% of the transaction amount). Typical credit-card swipe fees are 2-3% of the transaction amount, and stores can't predict the exact rate.
When I visit Australi
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You realize that your "cash back" incentive is really funded by the swipe fees that are being regulated here, right? That's a major source of revenue for the card issuers.
The people who think the bank actually gives them free money are so cute.
This story is about the UK, where I don't know the current status, but in the US there is no legal limit [suntimes.com] on swipe fees for credit cards (there is for debit cards: 21 cents plus 0.05% of the transaction amount). Typical credit-card swipe fees are 2-3% of the transaction amount, and stores can't predict the exact rate.
When I visit Australia and New Zealand, retailers there have surcharges based on the transaction mechanism that reflect their marginal costs: none for chip-and-PIN debit, and 1-1.5% for credit or contactless debit. (I assume they have the same surcharges when I'm not there, but I can't easily check....)
Under the EU the amount that can be charged for a card transaction is capped. There are ways to increase it slightly but they are expensive and draw the ire of the regulator.
In the UK it was easy to get a fee free credit card, fee free basic banking was and has always been considered a human right. Even people who have been convicted of multiple counts of card or financial fraud can still get an account albeit a very basic and heavi
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If they pass legislation that only affects one aspect of the card company's fee structure then the fees will just increase somewhere else, probably higher late fees, higher interest rates, maybe more annual fees.
And I have no problem with that. If I consider the interest rate to be too high (which is the case, by the way) I'll just pay my statement in full each month. If the annual fee is too high, I'll just stop using a credit card and pay debit instead. I have options. The merchants don't really have that option. They can't accept only cards with low fees. They can't add a surcharge to those paying with a credit card (their contract with Visa and Mastercard prevent them from doing so). That's why we need a cap on
Oblig. Hot Fuzz reference (Score:3)
The greater good!
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They can't add a surcharge to those paying with a credit card (their contract with Visa and Mastercard prevent them from doing so).
That is no longer true [fortune.com], although many retailers still decide not to because it annoys customers, or because so few people pay with cash or debit that it's simpler to just charge 2-4% higher prices.
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It depends on jurisdictions.
But unless there is a law preventing them to do so, Visa and Mastercard usually forces merchants not to charge extra when paying with a credit card.
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Exactly. Cash isn't free to handle. For mom and pop retailers, sure, it's cl
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The retailer might charge 2-4% more for credit because that reflects the additional marginal cost for a credit transaction. It's not that any alternative transaction mechanism is free, it's that the costs for the cheapest mechanism are going to get rolled into the base prices anyway.
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If retailers charge 2-4% to cover credit card fees because the fees are 2-4% more than handling checks or cash, then handling checks and cash is free? What about counting my multiple people (free time?), trips to the bank (free time and free gas, or free armoured car services?), insurance to pay for stolen cash (free?) or the cost of stolen cash (also free?), or the cost of bonding those in the business handling cash (again, free?).
Retailers are wise enough to make these calculations themselves.
Debit is usually the cheapest form of payment, followed by cash, and credit card is the most expensive.
Anyway, retailers should be free to ask an extra fee for credit cards if they want to. This is the best way to ensure Visa/Mastercard don't charge too much.
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It was always somewhat true. They got arround not charging surchages to the customer by raising prices then giving cash discounts.
You still see that a lot at gas stations.
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Any of those shifted places would be better than where it is now, if for no other reason the costs are transparent to the consumer making the decision to use the card. Currently, a fair part of the true cost of using a credit card are hidden in the price of products on the shelf. Even more unfortunately, some of those costs are extracted from people who have chosen NOT to use a credit card at all (they also pay that cost hidden in retail pricing).
Effectively, the current situation allows the major credit ca
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Yes good. Then people start paying cash and the cost of goods drops. When using a credit card adds 5% to the cost of a product it only makes sense to use the card when you don't get the discount if you choose to use cash.
Just another thing that will go nowhere and (Score:2)
What is the Risk in UK vs EU? (Score:2)
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1% - 1.5% transaction fees are in line with the online risk factors we see here in Canada, US and Mexico.
Not even close. It's 1-2 orders of magnitude smaller than that, given that the credit card company can just take back the money from the merchant's account in case of fraud.
Credit card companies rarely lose money because of fraud. And when they do, it's because they did something stupid.
If what you were saying was true, credit cards company would stop operating in any country with a capped 0.3% merchant fee. They all continue to operate, because 0.3% is enough for them to profit. At worse, they will reduce
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You are forgetting the other side is that the merchant can show they have actual steps to return so no fraud occurs.
Got scammed once a deal too good to be true and got a scarf instead of what i wanted. But because they did send a scarf and i didnt go through through their return process preoperly and didnt declare it in the correcr window i was stuck with the fraud.
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in your example again, there is absolutely no risk for the credit card company, which didn't suffer any loss.
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1% - 1.5% transaction fees are in line with the online risk factors we see here in Canada, US and Mexico. .
It roughly is around 2- 3.5% depending on your business and if the card is present for the U.S.A not counting charge-backs which put it back on the merchant.
fred6666 ( 4718031 ) If what you were saying was true, credit cards company would stop operating in any country with a capped 0.3% merchant fee.
Maybe, maybe not. Heard the same thing from Amazon though they are taking currency and coin in the locations that require cash for in person businesses. One question I have is interest rates for those who carry a balance regulated? In the U.S.A. it is effectively up to the states which are uncapped (some regulations can be bound by your state based on a
In the meantime (Score:2)
Governments have been proposing the elimination of cash because of the "hidden" costs of distributing and managing cash. Australia has removed hundreds of ATMs as they try to force citizens into using debit and credit cards everywhere; it's also creating a backlash.
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You're not important enough for the government to care about what you buy.
This argument is stupid and wrong.
It's stupid in part because it is wrong, but mostly because the government doesn't actually know who it cares about until it spies on them, and mass surveillance is now easy and cheap. You no longer have to pay someone to follow someone around all day. Now you can have their phone, browser, car, airtags, smart home automation equipment, etc etc spy on them, then use software to not only figure out what they're saying, but what the relevance is.
The idea that the government w
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It's not a matter of some mysterious government agency knowing you like spearmint gum. It's a matter of not handing a private company in the finance sector the ability to charge an effective private sales tax limited only by their avarice (in other words, unbounded).
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Why do you hate capitalism?
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Why do you love capitalism?
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I still carry cash, and it does have its uses. For example, companies which demand tips are pooled, I like tipping someone directly. Or giving cash to the homeless dude wearing the fake parking attendant vest when parking downtown so you don't return to all the windows on your car decorated by a baseball bat.
Cash still has its uses. If there is a power blackout, I can still pay the tab at a restaurant. If credit card machines are down, I can still get gas. I don't need to rely on an infrastructure that
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No they aren't. What they are proposing are central bank digital currencies - no more bills and coins, but digital euro/dollar/rmb.
The implementation can of course bad and give rise to tinfoil hats, but at least the european variant sounds pretty good - see chapter 6 on privacy at https://www.ecb.europa.eu/paym... [europa.eu] - especially the 6.1.1 about offline digital currency.
And no darn credit card fees.
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And no darn credit card fees.
That's what Debit Cards were supposed to be originally but invariably those were issued by banks who had to pay network fees to use the same terminals that credit cards used. Those terminals/networks etc. are cost components as are the transactions processed at a bank. If the gov't wants you to use digital currency there will need to be technology costs associated with dealing with that as well. It's a panacea of dumb. As for privacy, nobody needs to know that I gave that stripper a $20 tip for services ren
Hereâ(TM)s the solution: (Score:2)
Have to pay a price (Score:2)
For all the great improvements and opportunities Brexit brings with it!
I love my points card. (Score:2)
The landscape is complicated. But from my perspective, as the person walking around with the money that flows through this system, I have made a choice. I make the assumption that everybody downstream of me in the chain has made the calculation that accepting credit cards is positive for their business. It may be less positive than debit or cash, but it's still positive. And so I pay for almost everything with my points card.
Those rewards don't come from nowhere, though, and I realize it. I collect well ove
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Make the charge a visible line item on the bill. (Score:5, Insightful)
Card companies know this and that is why retailers are not allowed to present the fee as a line item.
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Do any of you *use* cards? (Score:2)
I just skimmed the posts here. What I see is:
"Nothing makes a difference, we'll just have to live with it (as we stand around our burn barrel in the rubble)"
Pay more fees? I dunno where you live, but I'm in the US, and have never paid a fee for a credit card. Or a debit card (which is similar to writing checks - it's *your* money).
Higher interest rates? You mean higher than 25%? Sorry, I think the Mafia only charges 30%.
And there is the ultimate hammer, if we can get rid of the right-wing paid off politicia
Brexshit means brexshit (Score:2)
Money (Score:1)