Mastercard to raise fees by at least 400% for EU firms selling to UK customers

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Mastercard is to increase the fees EU firms face to take payments from online shoppers from the UK by at least 400%, in a move that could mean higher prices for consumers.

When a credit or debit card is used, a percentage of the purchase price is paid by the retailer to the bank that issued it as an interchange fee, which is set by a payments firm.

Mastercard’s interchange fee is currently 0.3% on credit card payments and 0.2% on debit card payments but it has told EU firms that these will increase to 1.5% and 1.15% respectively from 15 October.

The Financial Times, which first reported the change, said the rise would benefit banks and card providers, rather than Mastercard.

Since 2015, the EU has capped these fees across the European Economic Area (EEA), including within the UK.

Mastercard’s current charges are in line with the cap. The new fees meet a cap for non-EEA cards used for online purchases within the area, which includes Iceland, Liechtenstein and Norway as well as EU countries. The change announced by Mastercard will apply to online sales at shops and businesses based in the EEA that are made on UK-issued cards. Travellers will not face the higher rate on face-to-face sales.

Transactions made by UK cardholders in UK businesses and shops will not face higher rates.

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In a statement, Mastercard said: “As a result of the UK leaving the European Economic Area, Mastercard will adapt interchange rates on UK cards to the commitments it gave the European commission in 2019 for non-EEA card transactions.

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“In practice, only EEA merchants making e-commerce sales to UK cardholders will see a change. Interchange is not a consumer facing cost but the fees paid between merchants and banks for the provision of payments. Consumers should not feel any impact of changes in interchange fees.”

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However, consumer organisations are concerned the charges will be passed on by retailers through higher prices.

Adam French, a consumer rights expert at Which?, said: “Consumers are already facing significant inconvenience and extra costs when shopping with businesses based in the EU and Mastercard’s decision to reimpose these hefty charges will come as another blow.

“The success of Brexit will be judged by how it affects our everyday lives, so the government must not neglect these consumer issues. Ministers must do a better job of explaining a confusing array of new rules and regulations and the government needs to work with the EU with a view to removing these costs as part of future negotiations.”

Visa, which is subject to the same interchange caps as Mastercard, has not announced any increase.

In a statement it said: “Should any change to interchange be appropriate, Visa would aim to provide our clients with advance notice to help them plan ahead – typically at least six months.”