January saw all extra charges for using a credit or debit card banned in the UK in a bid to stop consumers being charged unnecessarily for using plastic.
However, it seems that the well-meaning legislation brought in by the government could have backfired.
In 2015, the EU introduced rules to cap increasingly high interchange fees. It was on the back of these reforms that UK retailers and traders were banned from charging customers a levy at the checkout.
The market however is dominated by just two players in Visa and Mastercard, and these two companies have been quick to raise their scheme fees to counter the legislation. In some cases, by as much as 100 per cent in the short five month period since the ban.
Between them, Visa and Mastercard control more than 60% of the UK card market, meaning traders risk losing the majority of their custom if they shop around for a better deal. And whereas interchange fees are publicly documented, neither company will disclose its card scheme fees, making it impossible for traders to calculate how much each transaction will cost.
Retailers and traders are therefore being forced to increase prices to cover the extra costs imposed.
Before the ban, customers could see the extra charge for using a card and had the option of choosing a cheaper payment method, whereas now everyone must shoulder the cost, whether they use cash or card.
The British Retail Consortium (BRC), which represents UK shops, are worried that some traders may be forced to stop accepting credit and debit cards altogether.
They commented: ‘As consumers do not pay to use their cards, there is little awareness of increasing fees, but they – like any other cost – are ultimately paid for by the consumer. As card fees have increased, retailers are faced with a choice of raising prices or absorbing costs to remain competitive.
Retailers and trader are calling on the government to intervene and address the monopoly position that Visa and Mastercard hold in the UK.
The BRC said: ‘The Payment Systems Regulator [PSR] needs to investigate Visa and Mastercard for their abuse of a dominant market position.’
Both Visa and Mastercard have denied profiteering, whilst still refusing to disclose card scheme fees.
Visa commented: ‘Our pricing means we can invest in world-leading cyber security and consumer protection, in innovation such as contactless and mobile payments, and in providing a global network which enables billions to make purchases safely, securely and reliably.’