Retail companies in Britain have alleged that Visa and Mastercard have benefitted during the novel coronavirus pandemic by charging “excessive fees”.
Over the last two years, the two companies have almost doubled the scheme fees charged, said British retail groups.
With credit card bills rising by another £40 a year, the additional costs could now be passed on to customers because of the excesses, the groups warned.
“It is vital that the government takes action to tackle excessive card costs,” said the BRC’s Andrew Cregan.
“If a phone or energy company increased their fees by such an amount there would uproar. It’s an abuse of a dominant market position by these companies. They’re two of the most profitable organisations in the world and they’ve got merchants over a barrel,” said Cregan who is the head of finance policy at the British Retail Consortium (BRC)/.
The card schemes should be investigated by the Competition and Markets Authority (CMA), the industry body has now demanded.
“Visa enables millions of merchants throughout the UK to access the benefits of digital payments, giving them the ability to reach billions of potential customers both in their local communities and across the globe. Visa has delivered to UK consumers some of the most secure and innovative payments solutions available anywhere in the world,” said Visa spokesperson.
“Card-based payments continue to grow in popularity with consumers as they offer unrivalled convenience, security and protection. More shops and businesses are also adopting them either for the first time or in new contactless or digital formats, as they too benefit from faster, more efficient and secure payments, which in turn generates significant value for their businesses,” said a Mastercard spokesperson.
A call for taking action to tackle card fees was given jointly by the trade bodies in the retail and hospitality industries. They said that the problem was accentuated during the pandemic and related social distancing rules because most of them have been forced to accept only card payments.
Card schemes were clearly the “least competitive layer of the card payments ecosystem”, with about 98% of the total UK market being controlled by two companies only, the BRC said in its latest Payments Survey.
“Complex billing structures have become a powerful tool to bamboozle political, regulatory or legal attempts to rein in increasing abuses of the schemes’ dominant market positions,” said the industry body.
There has been a series of increases in scheme fees with payment companies increasing fees by 39 per cent in 2017 and 56 per cent in 2018 and these numbers are measured as a percentage of turnover, BRC said and described these schemes as “clear demonstrations of an abuse of market dominance”.
“The events of the last few months have accelerated a move towards the use of card payments across hospitality, with many now not accepting cash on safety grounds,” pointed out David Sheen, public affairs director at UK Hospitality.
“The sector needs to be protected from excessive fees for doing the right thing.”
Since local shops are unable to negotiate better fees with payment firms, therefore they are being penalised the most, said Jeff Moody, commercial director, British Independent Retailers Association.
“The contracts available to large national chains are often not available to individual smaller independent retailers,” he said. “With card transactions now the majority of their payment transactions, these costs are therefore being felt by consumers.”
(Adapted from BBC.com)