Credit and debit card surcharges to be banned
The UK government announced on Wednesday 19 July 2017, that credit and debit card surcharges will be banned from 13 January 2018.
The government’s move follows the revised Payment Services Directive (PSD2) from the European Union, which all EU Member States, including the UK, will have to implement by 13 January 2018.
What does this mean?
From January next year, businesses will not be allowed to add any fees for card payments. Businesses such as airlines, theatre and concert booking sites, take-away food apps, and even local councils, HMRC and the Driver and Vehicle Licensing Agency (DVLA) will have to change their payment policies.
The Treasury estimates that consumers spent £473 million on card fees, in 2010 alone.
What will businesses do with card fees?
Businesses and organisations face extra charges when someone pays by credit or debit card. Until now, businesses were allowed to pass on charges that “genuinely reflect their costs”. These costs are amounts that the bank charges businesses to process a credit or debit card payment.
It is speculated that firms may put up prices for their products and services. The Treasury, however, hopes that this won’t be the case as prices become more transparent.
What is PSD2?
PSD2 is the legislation that will be applied across the EU and its Member States. It is an update from the original directive (PSD) adopted in 2007. The PSD created a single market for payments and the foundation for a Single Euro Payments Area (SEPA). Many new entrants, especially in the tech and fintech area, are outside the scope of the PSD and, therefore, not regulated by the EU. The PSD2 aims to improve security and fraud prevention but at the same time encourage innovation and competition. In other words, PSD2 paves the way for a Digital Single Market.