Lack of Payment Competition Raises Costs

Mastercard has announced that the interchange fee on products bought online in the EU by British card holders will increase from 0.3% to 1.5%. Debit card fees will increase from 0.2% to 1.15%. This fee increase is justified because now the UK is no longer part of the EU, fees will be charged at the ‘inter-regional’ fee level rather than ‘intra-regional’ fee level.

Card transactions incur Merchant Service Charges (MSC). These are made up of two parts - the interchange fees, referred to above, paid to the cardholder’s issuing bank, and scheme fees, paid to the schemes. The international card schemes set both fees. The costs are hard to map out because they are not published, and the charging structures vary significantly.