Credit card giant Mastercard is set to increase the fees it charges EU merchants for taking payments from online shoppers in the UK by at least 400%, sparking fears that merchants could choose to pass on these costs to UK consumers.
The Financial Times, which first reported Mastercard’s latest move, said that the increase would benefit banks and card providers rather than Mastercard itself.
Since 2015, the European Commission has capped credit card interchange fees at 0.3%. Now that the UK is no longer part of the EU, however, payments between the UK and the European Economic Area are now deemed “inter-regional”, so the interchange fees will increase to 1.5%.
The fee for debit card payments is also slated to rise from 0.2% to 1.15%. Both fee increases are set to take effect on 15 October.
MP Kevin Hollinrake, chair of the parliamentary group on Fair Business Banking, said the move “smacks of opportunism.”
"I would urge the regulators to step in as a matter of urgency to ensure that financial institutions do not use Brexit as an opportunity to hike up costs that consumers will ultimately bear," he said in a statement to the FT.
Anton Komukhin, Head of Product, at Unlimint, also expressed concern. "The increase in fees announced by Mastercard for UK purchases from the EU will definitely be a challenge for businesses on both sides (both EU and UK) and such a significant increase in price will undoubtably impact trade with the UK," he said. "It’s obvious that such a reaction is not aimed at maintaining cross-border turnover or trade - and looks only like an attempt to make more money from merchants in an already challenging environment due to Brexit and the pandemic."
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Mastercard has defended its decision, pointing out that the new interchange levels are already paid by EEA merchants on all cards issued outside of the EU, and that there is no evidence that European businesses charge consumers in these regions higher prices than those levied for consumers within the EEA as a result of this.
"In practice, only EEA merchants making eCommerce sales to UK cardholders will see a change,” the firm said. “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.”
This latest change comes as UK businesses face a number of new hurdles stemming from the country’s withdrawal from the EU. Increased red tape has led to delays in goods imports and exports, and the trading of European shares has moved away from London due to new restrictions.
The estimated 1.8 million British expats living in the EU should consider reviewing their personal financial strategies as ‘no-deal’ Brexit looks increasingly likely, warns the deVere Group.
The warning from James Green, deVere Group’s divisional manager of Western Europe, comes after British Prime Minister Theresa May claimed that a no-deal Brexit “wouldn’t be the end of the world,” as she sought to downplay statements made by Chancellor Philip Hammond.
It also follows the UK government publishing last week its first technical notices advising businesses and consumers on the preparations being done for the prospect of there being no Brexit deal.
Mr Green comments: “A no-deal Brexit is now expected by a growing number of experts and the wider population to be the most likely outcome.
“If the UK crashes out of Europe with no deal in place, the estimated 1.8 million expats living in the EU could be financially impacted in two key ways.
“First, the pound would inevitably suffer and it could fall hard. This would deliver another heavy and serious blow for those who receive UK pensions or income in pounds as the cost of living, in effect, would be significantly more expensive.
“Second, unless there is considerable post-Brexit collaboration between the UK and EU there is a risk that existing payments from British companies, including pension and insurance companies, to those living within the European Economic Area (EEA) could be disrupted or even made impossible. Of course, this would be a major inconvenience to many UK expats.”
He continues: “Against this chaotic backdrop it is prudent that British expats in the EU consider reviewing their personal financial strategies sooner rather than later with a cross-border financial expert. This will help best position them not only to mitigate the risks of a no-deal Brexit, but also to enable them to take advantage of potential opportunities that may arise.”
Mr Green concludes: “Unfortunately, a smooth and orderly exit of the EU is looking increasingly unlikely and this can be expected to hit the finances of many expats.
“They should seek to make their financial strategies ‘no deal Brexit’ proof.”
(Source: deVere group)
Tony Butterworth is a Senior UK Immigration Consultant with 23 years’ experience in UK immigration, seven of which were spent in the Home Office as Executive Officer. He works with large multinational companies and individuals of all nationalities, such as skilled migrants, investors and high net worth individuals who are seeking work authorisation for economic based activities. Here he offers his insights into the Brexit implications on immigration in the UK, recent regulatory developments in the sector and what it means to be an immigration practitioner.
As a thought leader in the segment, what would Brexit mean for immigration in the UK? Do you believe that leaving the EU will actually reduce immigration in the country?
Whilst the true impact of Brexit on UK immigration remains to be seen, it will inevitably lead to changes to the current EEA policy. Following the Prime Minister’s speech earlier this month, we know now that the United Kingdom intend to impose restrictions on nationals of EU states wishing to enter the United Kingdom. The question remains as to when and how this will take form.
Currently, there is no legal requirement for EEA nationals or even their family members to register their residence with the Home Office. There could be significant numbers of these migrants living in the United Kingdom with no Home Office record. This issue has been addressed in the recent introduction of The Immigration (European Economic Area) Regulations 2016. What is evident is that the introduction of stricter registration requirements on EEA nationals and their family members is almost a certainty. Another point to bear in mind is that removing free movement of EEA nationals into the United Kingdom does not necessarily mean a reduction of workers entering the United Kingdom. Employers will still be selective as skills and experience are required to fill posts. If these cannot be met by UK workers, they will be forced to continue to look for talent further afield. It is likely that any changes to immigration requirements, as a result of Brexit, will not deter employers from recruiting the best and most skilled workers.
What would you say was the biggest regulatory development to affect the UK Immigration sector over the last 12 months?
The UK Immigration Act 2016, came into force in May 2016. This Act is significant because not only did it introduce changes to Immigration law and policy, but it also covers housing, social welfare and employment. Significant changes include the right to freeze bank accounts and seize driving licences of migrants who are here unlawfully, imposing criminal sanctions on employers found to be recruiting illegal workers, and the right to remove all migrants from the United Kingdom pending their appeal against the decision to remove.
What do you anticipate for the sector in 2017? Are there any legislative changes on the horizon?
Following changes to the Tier 2 category which were implemented in November 2016, further changes are due to be applied in April 2017. This includes the introduction of the ‘Immigration Skills Charge’ under which employers will be required to pay a fee of £1,000 per year for each sponsored migrant, requiring Tier 2 (ICT) Migrants to pay the Immigration Health Surcharge (IHS), increasing the Tier 2 (General) salary threshold to £30,000, and abolishing the Tier 2 (ICT) Short Term category. The Immigration (European Economic Area) Regulations 2016 will also come into effect on 1st February 2017. The main changes in the regulations are the introduction of a ‘genuineness test’ for Surinder Singh cases, the requirement for EEA applications to be completed on prescribed forms, and abolishing the right of appeal for extended family members.
What challenges does your work throw up regularly and how do you structure your approach in order to overcome them?
Immigration practitioners face challenges in keeping abreast of the ever changing and sometimes complex immigration rules and policies; monitoring regulatory developments, analysing their impact on both individuals and businesses, and implementing the necessary changes in the interests of our clients. It is important to actively engage in dialogue with regulators and participate in consultations, where possible. Our aim is to keep our clients informed of changes as soon as these are anticipated and to provide advice on overcoming any obstacles such changes will pose.
What are Ferguson, Snell & Associates’ major achievements?
Apart from ensuring our clients continue to receive the high level of service we have become known for, evidenced by the number of long standing client still with us, Ferguson, Snell & Associates continues our journey with a strong global team. By responding to our clients need for immigration and coordination services into the US, EMEA and emerging markets, we are growing from strength to strength. Our global team brings a new dimension to our business and sets us apart from our close competitors. Coming up with an efficient and strategic global immigration plan is a challenge when immigration is not included in the corporate agenda. But our skills in providing efficient and creative solutions is where we prove ourselves to our clients.
Client referrals and a professional, experienced and talented team is testament to our progress and reputation.
