UK retailers claim victory as MasterCard scraps changes to debit fees

UK retailers claim victory as MasterCard scraps changes to debit fees

Following sustained pressure from retailers, Mastercard has ditched plans to introduce a new ad valorem fee structure for the launch of its new debit card in the UK.

The British Retail Consortium (BRC) says pressure from its members led to the withdrawal of MasterCard's new debit card charging system, which would have seen percentage, or so-called ad valorem, fees charged to retailers.

UK retailers currently pay a fixed fee on debit card transactions -ranging from 6-18 pence - regardless of the value of the transaction. But MasterCard was pushing to introduce a new system whereby retailers would have been charged a fixed fee of 3.5 pence plus 0.15% of the purchase price. This would have meant higher card charges on any item priced above about £20.

The BRC says retailers feared the ad valorem charging scheme would lead to sharply increased costs, which would ultimately have to be recouped from customers.

Says BRC director general Kevin Hawkins: "Card companies' administration costs are no greater for large transactions than small ones so there can be no justification for higher charges. And why should retailers of larger items be disproportionately penalised?"

"Opposing ad valorem or percentage card charges is a point of principle for retailers of all sizes," says Hawkins. "They feared this would have opened the door to wider use of this formula for bumping up card companies' revenues. Higher costs would put the squeeze on retailers and ultimately filter through to customers."

"Debit card fees have been steadily rising anyway. With UK and EU competition authority investigations continuing, card companies can see the writing on the wall for their huge fees. Some will suspect this was simply another tactical ploy to recoup lost revenue," he adds.

The UK's Office of Fair Trading (OFT) is currently investigating both MasterCard and Visa's current UK interchange fee arrangements relating to consumer and commercial credit cards, charge cards and deferred debit cards.

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