While 2015 will see many changes across multiple industries, none will be as affected as the credit and debit card sectors. More specifically, the EU is set to introduce a cap on interchange fees, which in theory should prove to be a positive step for card accepting businesses and merchants in the year ahead. This is likely to be implemented at some point during the second financial quarter, although the exact impact of such a move continues to be debated by experts.
The Facts and Figures: A Move into the Unknown
Next year, the European Union will cap debit interchange at 0.02%, which currently translates into £0.08in the UK. They will also cap credit card interchange at 0.3%, which represents a similar monetary amount. This will have a direct impact on card and financial service providers Visa and Mastercard, although the later has yet to revise its specific interchange rates for public consumption. It is likely to reflect the higher end of the EU cap; however, as otherwise providers are restricting themselves financially and imposing unnecessary sanction on the profitability of each transaction that they oversee.
While this would theoretically benefit everyone from card processing service providers such as Card Cutters to small businesses and consumers, this will not necessarily prove to be the case. To begin with, the rate of debit and credit card processing fees has already risen considerably over the last decade, with the result that the impact of the forthcoming cap is compromised considerably. After all, the capped rate is still considerably higher than the typical fees charged earlier in the decade, meaning that initial savings for business owners may seem minimal.
The Last Word for Business Owners and Consumers
With this in mind, we need to be practical when considering the potential impact on consumers. Given that vendors and merchants are being offered minimal savings by the reforms, even those that share these with consumers will be unlikely to achieve any great results. This means that customers are unlikely to notice any huge savings this Christmas, especially as they are set to spend record amounts online this year.
So while the efforts of the EU in regulating credit and debit fees should be applauded, the reforms perhaps do not go far enough in driving adequate levels of change or improvement. This is certainly the view of experts, although we will need to reserve judgment until the cap is introduced for real in 2015. It is at least a step in the right direction, and one that may lead to further discussion and reform in the near future.