Following Britain’s controversial vote to leave the European Union, it is important that merchants assess the future impact that Brexit will have on the costs of merchant card acquiring.
Even though the Card Schemes (Visa and MasterCard) are responsible for setting interchange fees, it is the EU that has recently enforced caps on interchange fees. If Britain were officially to leave the EU, they would no longer be obligated to adhere to recent EU interchange fee regulations (IFR). UK would now have the ability to set their own interchange fee caps. Any changes to interchange rates would have a bearing on the level of merchant service charges incurred by merchants on both debit and credit card transactions
The collapse in Sterling in the last week can also impact on merchant service charges. There is a fixed element of Scheme fees that is charged in Euros while some inter-regional line items are charged in dollars. This will lead to increased interchange and scheme fees for merchants based in the UK.
Debit and credit cards issued outside the UK but within the EU region may now be classified as international cards in the UK since leaving the EU would most likely mean leaving the EEA. Interchange fees for International transactions are significantly higher than for intra-regional (EU) transactions since the interchange caps are no longer applicable. This will particularly affect hotel groups and car rental companies since they process large volumes of international transactions.
Even though it is too soon to draw any conclusions regarding the possible impact Brexit may have on merchant service charges, it is evident that changes will occur. Brexit may ultimately lead to increased fees for merchants due to the fall in Sterling and reclassification of transactions completed with cards issued in the EU region.