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Ban on Plastic Card Charges - More Policy Detail Needed

The government has announced that fees for paying by plastic charges will be banned from 13th January 2018 All plastic card surcharges will be banned. This will include credit, debit, Amex and linked payments such as Pay Pal and Apple Pay. The rules will apply to any UK company, which is selling to consumers. On the surface this appears to be good news for consumers but in the event may not turn out to be the case

KEY POINTS

  • The term “UK Company” has yet to be defined. For example will this include small stores that are not strictly “companies”?
  • The term “consumers” has yet to be defined. For example will this include business customers as in (say) cash & carry’s?

 

IMPLICATIONS

  • The banks charge vendors a range of merchant fees for plastic charge transactions. Many pass these charges on to their customers.
  • In many cases banks also charge for the use of the merchant terminals
  • It is likely that retailers will be prevented from mitigating these costs through direct means by passing on to the consumers.
  • Retailers may decide to stop all plastic card charges and insist on cash only transactions.  Thus avoiding the transaction overhead.  But this will undoubtedly adversely affect sales and is not a realistic option.
  • The most likely result is that vendors will increase their prices across the board to cover their costs.
  • The overall impact will be depend on the vendor’s range of goods and services. Obviously the higher the transaction values and gross profit, the lower the impact. Therefore the smaller convenience store operators will be unfairly affected due to their low transaction values & tight margins.

 

It this stage we don’t know enough about the policy detail but it does seem to pose a threat to independent small storeowners. Let’s see how the policy shapes up. In the meantine join the discussion forum to air your views.

 

David Gilroy

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