Interchange fees are a cost paid by retailers, through their payment transaction 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. From the BRC’s Annual Payments Survey, Payment cards account for over 74 per cent of point of sale retail transactions by value, and are a must have payment method for all retailers.
Historically, interchange fees vary wildly depending on the type of card used and, according to European Commission estimates, cost retailers £1 billion in the UK every year, costs that continue to be absorbed by retailers. The BRC has long recognised the unfairly high and opaque fees associated with the acceptance of card payments and had 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 the Annual Payments Surveys, the BRC has been 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 could reduce all retailers in the UK costs up to £480 million annually.
Now that the Regulation has come into force, the BRC is continuing to work with our members and the regulators responsible for its implementation in the UK, to ensure that the benefits of the IFR are fully realised and passed onto all retailers.