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Wednesday, October 21, 2020

UK retailers blast Visa, Mastercard over interchange

Retailers in the United Kingdom are calling for government intervention to curb rising interchange. Five trade associations representing businesses there have called for “decisive action” by the UK’s Competition and Markets Authority to curb rising interchange.

The move comes as the UK government wraps up the first stage of a payments landscape review. Regulators have been soliciting comments on challenges, opportunities and risks posed by current trends in payments and payment networks. It also follows a June 2020 decision by the UK Supreme Court upholding a lower court ruling that Visa and Mastercard interchange fees restrict competition.

The ruling means card-accepting merchants could be due tens of billions of dollars in refunds on interchange assessments dating back to 2013. The exact payout still must be determined by the UK’s Competition Appeal Tribunal, but reports in British media outlets suggest the final tally could run between $22 billion and $88 billion.

To put that payout into perspective, the 2018 out-of-court settlement in the so-called Walmart suit, which pitted U.S. retailers (including Walmart) against Visa and Mastercard over alleged interchange overcharges, amounted to $6.2 billion.

Spiking card volumes due to COVID-19

The British Retail Consortium, which along with four other trade groups issued the latest call to action, said it has conducted a survey of spending habits showing card payments grew from 54 percent of all transactions in the UK in 2016 to 61 percent in 2019.

“This trend has accelerated under coronavirus, which [has led] to more customers shopping online and by card in store,” the BRC wrote. “At a time when retailers are facing increasing costs due to coronavirus and Brexit, the increasing scheme fees place further pressure on retailers.”

The BRC estimates the cost to retailers of accepting payments reached £1.1 billion ($1.42 billion) in 2019; of that total £950 million ($1.23 billion) was spent on card processing. The cost to process credit card payments rose 15 percent from 2016 to 2019, while debit card processing fees grew 6 percent during that period, the BRC said.

Joining the BRC in its call for government action are the British Independent Retailers Association, the Association of Convenience Stores, the Federation of Small Business and UK Hospitality.

“The events of the last few months have accelerated a move towards the use of card payments across hospitality, with many now not accepting cash on safety grounds,” said David Sheen, public affairs director at UK Hospitality. “The sector needs to be protected from excessive fees for doing the right thing.”

“The costs that accompany acceptance of card payments represent yet another overhead for embattled small retailers,” said Martin McTague, vice chairman of the Federation of Small Businesses.

“With card payments accounting for almost 80 percent of retail sales, it is vital that the government take action to tackle excessive card costs,” added Andrew Cregan, head of finance policy at the BRC. end of article

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