Business leaders are urging the Treasury and Payments System Regulator to step in and save UK businesses billions in unnecessary card transaction fees as the cost of doing business explodes.
240,000 businesses are represented by the Axe the Card Tax campaign, with trade bodies including the Coalition for a Digital Economy (Coadec), Federation of Small Businesses, British Retail Consortium, Association of Convenience Stores, the Federation of Independent Retailers and the Charity Retail Association.
The average cost of a card payment to the retailer can be as high as 0.7% on every card payment. Experts from the campaign estimate that this equates to a £5bn annual card tax paid by British businesses.
The Axe the Card Tax campaign is calling for a rebalancing of the payments market, which is stripping struggling small businesses of much needed cash. The campaign has set out a plan to protect UK SMEs and is calling for:
- The Payment Systems Regulator (PSR) to freeze all transaction fees until PSR investigations of the payment sector are complete.
- The PSR to reverse the 400% rise in cross-border interchange fees post-Brexit that was introduced earlier in 2022 by major card schemes.
- The Treasury to initiate its own review of the cost of accepting card payments in the UK.
- Regulation of alternative providers and setting up open banking so that retailers wanting to offer alternatives to card payments have certainty and transparency.
“With the rise of digital tech over the last decade, you’d expect to see a variety of ways to pay emerging, but in reality only card payments have benefited,” said Charlie Mercer, Head of Economic Policy at Coadec, “Cards have their place, but they’re not the only way to pay.”
With the rapid rise of card payments, the major card schemes have come to control the payments market, with businesses given little to no choice but to accept the fees they charge. Visa and Mastercard own 99% of the card payments market.
These fees have been steadily increasing. Experts estimate that the scheme and processing fees charged by card giants have increased by up to 600% since 2014.
Charlie Mercer, head of economic policy at Coadec, said, “Regulation has failed to level the playing field in the payments sector, cutting small businesses off at the knees. While prices rise across the board, the Government has slept on the cost of taking card payments leading to crippling fee rises.
“The UK’s thriving Fintech sector can challenge the closed shop of the payments market – but not without help.
“By axing the card tax, we can save British businesses money, help battle the cost of doing business crisis and unleash payments innovation in the UK.”
Craig Beaumont, Chief of External Affairs at the Federation of Small Businesses (FSB) added, “In the current economic conditions small businesses are facing, anything which adds to their costs – like opaque and fluctuating card fees when accepting consumer payments – is bad news.
“There’s a lack of transparency and competition in the card fees market, and we think small retailers deserve much better on both counts from card processing providers, along with an idea of how much they will pay each month.”