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European Credit Card Processing Fees Could Lower Prices

Oct 14, 2015
Posted by: Marketing
Category: General
New credit card processing fees set to take place Dec. 9 could save British merchants up to £700 million a year. What will they do with the savings?
credit card processing fees

The European Union recently agreed on a set of regulations that placed a cap on the credit card processing fees that merchants must pay to banks when they process a debit or credit card transaction. These credit card processing fees are notorious for costing British merchants billions of pounds per year, but the new regulations, set to take place December 9th, could save British businesses up to 700 million pounds every year. The British government states that they expect merchants to transfer the savings to their shoppers in the form of lower prices, thanks to the fee caps implemented on banks.

More Money for British Merchants

ExpressAndStar.com reports that credit card processing fees enacted by banks will be capped at 0.3%, while domestic debit card processing fees will be capped at 0.2%. The lower interchange fees will make it easier for merchants to generate revenue, but could also have a chance to benefit shoppers as well. Since merchants won’t have to pay as much to process card transactions, prices could drop nationwide as a result.

However, the price drop isn’t guaranteed. While the British government expects this money to make its way back into shoppers’ wallets, the first ones that stand to gain anything are merchants.

There are several things the merchants could do with more money in saved credit card processing fees, and it’ll be interesting to see how British businesses move forward after the caps are enacted later this year. For one, the fight against fraud is an expensive one, and some merchants could elect to take their savings and use it to prevent fraud. Some could use the money to expand, or to use in other areas like marketing or advertising. Others could simply pocket the extra money saved. However, the smartest thing for merchants to do could be to lower their prices and attract more business. It could pay off in the long run.

Learning the Ins and Outs of Credit Card Processing Fees

In the world of credit card processing and e-commerce, interchange fees are normal. It is how banks can cover the costs of obtaining payments from credit card issuers and spending time handling the sensitive data that goes along with card payments. However small credit card processing fees are, they can add up and account for billions of pounds. As a merchant, learning more about the new European interchange fees can help you understand what to expect, and how the caps affect your business.

What Will You Do?

Are you a merchant in Europe? We are interested to hear what European merchants will do with the savings in credit card processing fees. Invest in cyber security? Lower prices all around? Or take no action? Please leave us a comment.

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