Card fees? Don't get me started...

Out of All Proportion

Since I joined Williams in 2018, the Interchange fee that we pay on every payment from our customers’ preferred type of payment card (a VISA or Mastercard corporate debit card) has increased by an astonishing 666%.

In that time, the price of an average combi boiler has increased by… nothing. For some reason, while designers and manufacturers of hardware (and indeed software) have managed to develop more efficient, lower-cost products that deliver as much or more than their predecessors, the banking sector has seen fit to inflate prices on the same service beyond any reasonable index in the area that is most critical to the UK’s economic wellbeing – SMEs.

Softening us up?

If I were a more cynical person (and I’m not), I might think that the banks, seeing the writing on the wall from the CMA’s 2016 report, have been systematically gouging the payment card market over the last six years, in order to be able to say, once Open Payments had developed into a viable alternative, “look how cheap this new payment type is, compared to all those nasty card fees”.

A weak mandate

I was talking to a heating engineer this week, and I explained that the card he’d just used to pay for a boiler meant that we had just paid out over ￡7 in fees, whereas if he’d opted to use our Open Banking payment method at the checkout, we’d have been charged around 30p (including the SMS message to him confirming payment). I explained that there’s a great new payment type that we’ll be trialling from next month (“Digital Debit” – I’m fed up explaining what VRP stands for), but that because the CMA didn’t include this in their mandate, the banks can make up the rules on what they charge. “Looks like my free banking’s gonna be costing you a pretty penny,” he observed.

A chance to reset?

I do hope he’s wrong, and that the banks involved in setting pricing for non-mandated Open Banking services realise that in order for Open Payments to succeed, they need merchants’ buy-in, and in order to get that, they need to move away from existing transaction fee scales. But maybe there’s a lack of incentive for them; yes, thanks to the mandate, the banks have to offer a limited range of services at sensible pricing, but if your golden goose is still laying, why actively look for other poultry? Merchants don't dare to refuse or surcharge expensive card types, and no customer is going to switch to a new bank because they don’t like their merchant fees!

Luckily though, as I said, I’m not a cynical person.?