Interchange fees are a cost paid by retailers, through their bank or payment processor, each time a customer uses a payment card.
Retailers are unaware of the exact cost of interchange fees until after they are billed, which significantly increases risk and uncertainty, particularly for SMEs. Yet retailers have no choice in paying it. According to the annual BRC Payments Survey, cards account for over ¾ of retail transactions by value, and so they are a “must have” payment method for all retailers.
Historically, interchange fees vary wildly depending on the type of card used and – from European Commission estimates – cost retailers £1 billion in the UK every year. Costs that continue to be absorbed by retailers.
The BRC long recognised the unfairly high and opaque fees associated with the acceptance of card payments and campaigned for legislation at both the UK and the EU level in order to address it by significantly reducing the level of interchange fees and allowing retailers to freely choose the cards they accept.
The BRC was successful in ensuring that capping of interchange fees was included among the key recommendations of the Prime Minister’s EU Business Taskforce report on reducing red tape, published in 2013.
And through our extensive legal submissions and participation in Court Cases both within the UK and Europe, and the provision of substantive data through annual Payments Surveys, the BRC was instrumental in securing an Interchange Fee Regulation (IFR) for the EU which came into effect on 9 December 2015. The IFR created a cap on interchange fees of 0.2 per cent for debit cards and 0.3 per cent and introduced measures to give retailers more choice over the types of payment cards they accept.
The BRC estimates that the IFR reduced costs for all retailers in the UK by up to £480 million annually.
Today, the BRC is continuing to work with our members, Government and the regulators to ensure that the further benefits are secured for retailers in the IFR Review, and to minimise the adverse impacts of Brexit on UK merchants relating to this key piece of retail payment legislation.