Hotel and Car-Hire Companies Reaping Rewards From Interchange Claims
Interchange claims may be more lucrative for hotel and car-hire companies. Merchants with large volumes of commercial (B2B) and international spend may be more likely to receive large sums in claims brought against the card schemes.
The European Commission introduced pricing caps on consumer cards issued within the EU in December 2015 which limited consumer credit and debit interchange at 0.30% and 0.20% respectively. This was great news for most merchants, such as groceries, as most of their transactions are covered by the caps.
However, other sectors, such as hotels and car-hire, do much of their business with commercial or international customers. Card costs can therefore be well over 2% because they are not covered by the caps.
Bankhawk recently reported that merchants from over 20 EU countries are involved in legal action against the card schemes and many have already received substantial settlements. While all of the claims which have reached trial so far covered domestic and intra-EU fees only, we understand that a number of hotel and car-hire claimants are seeking to recover all of the interchange fees paid. With both Visa and Mastercard recently agreeing to limit international interchange from October 2019, there seems to be a clear acknowledgement those fees are anti-competitive as well.
What’s more, it seems there is also merit in seeking compensation for scheme fees and many will argue that the card brands are abusing a dominant market position. This has allowed them to steadily increase revenue in the last few years and has been especially true since Visa Inc. paid 70x earnings for Visa Europe in 2016. Around that time, then-CEO Charles Scharf told investors there was an opportunity to “increase yields” in Europe despite the company regularly posting margins of over 60%.
While claims have been brought by merchants from across many different sectors, hotels and others with large commercial and/or international spend could be set to gain the most. And with claims limited to five or six years in most EU jurisdictions, it is important to bring the claims sooner rather than later.
As hotels and car-hire companies are reaping the rewards from interchange claims, contact Bankhawk for more information on how this could benefit your company.