Mastercard has reportedly decided to increase interchange fees by over five times for shoppers in Britain when buying from a company based in the European Union (EU).
This move, which is in light of the no-deal Brexit, has raised concerns over higher consumer prices among companies that rely on online payments, the Financial Times reported (FT).
Payments giants such as Mastercard and Visa charge an interchange fee on behalf of banks, for every use of debit and credit cards over their network.
Visa has not spiked their fees, but they have not ruled out the move as well, the report added.
A spokesperson for Visa said: “Should any change to interchange be appropriate, Visa would aim to provide our clients with advance notice to help them plan ahead.”
Starting from 15 October 2021, Mastercard will levy a 1.5% interchange fee on every online credit card transaction from the UK to the EU, up from 0.3% at present.
In the case of debit card transactions, Mastercard will charge a 1.15% fee, up from 0.2% currently.
Back in 2015, the EU introduced a limit in the wake of hidden fees leading to higher costs for companies and higher prices for consumers.
This helped merchants save nearly €1.2bn and between €864m and €1.9bn of estimated overall annual consumer cost.
However, Mastercard informed the merchants that post-Brexit this cap is not applicable for some payments between the UK and European Economic Area (EEA) as they are “inter-regional”.
The payments giant said that the increase is in line with the levels it had agreed with the European Commission in 2019.
The fee hikes will benefit the banks and card issuers in Britain, rather than Mastercard, according to the FT report.
However, in the case of consumers, they may not be aware that the services offered by companies with EU-based operations are international transactions.
Companies can also pass on the fees to consumers, resulting in higher costs on products they intend to purchase.
Fair Business Banking chair of the all-party parliamentary group Kevin Hollinrake said that the move was “alarming”.
He added: “These smacks of opportunism and I would urge the regulators to step in as a matter of urgency to ensure that financial institutions do not use Brexit as an opportunity to hike up costs that consumers will ultimately bear.”
British startups representative and head of policy at the Coalition for a Digital Economy Joel Gladwin said: “Some people might put this change down to Brexit, but it is actually just greed. It is well within the power of the card schemes to make merchants’ lives easy and keep things operating as they were pre-2021.
“Not only does this hurt the already squeezed bottom lines of e-commerce start-ups and subscription businesses, it comes at a time when a huge number of small businesses have shifted to online models to survive.”