The EU payment services directive PSD2 comes into effect January 13th the same day as the UK’s Open Banking regulation. It will take time for all aspects to trickle down to consumers but one significant and instant change is the elimination of card surcharges.
For over 50 years consumers have been hit with surcharges for use of non-cash card transactions. In today’s digital world it has become far too acceptable for airlines, book sellers, travel agents and cinemas to bolt on additional fees for transactions, sometimes adding as much as 5% to the total cost.
Payment processes are complicated and most people are unaware of what happens in the background. There can be up to 5 or 6 institutions involved in a single payment including acquirers, merchants and financial institutions and each needs to earn a fee.
The removal of card surcharges is likely to result in reduced costs but also possibly some price inflation. It’s been estimated that the airline industry in Europe generates €1.5BN per annum in additional fees per year, they are certain to try to offset the loss to passengers with increased fares. In the UK it’s estimated a total of £473M was charged on debit and credit cards in 2016 alone and businesses will look to recoup in some other way.
However the fact that the regulators see surcharges as unnecessary, penal and now dated given the volume of digital flow demonstrates a willingness to consider the consumer. Eradicating surcharges shows a determination by authorities to transition to a more transparent payment regime where corporations charge for actual services and not add-ons. It’s a change in favour of the consumer, to open market dynamics and increased price competition.
- Which? – Consumer rights campaigners UK
- Bankhawk Analytics