Find out everything you need to know about Visa interchange rates
In response to new EU regulations, Visa has introduced a new way of charging businesses for processing debit card payments.
The charge affects what is know as the interchange rate: a fee that a card user’s bank charges a shop or business’ bank for processing a card payment.
Interchange is quite a tricky subject, so we’ve put together a blog post that will explain why the new charges have been introduced and what they will mean for businesses in the UK.
What exactly are interchange rates?
The interchange fee is paid by the retailer’s bank (also known as the merchant acquirer) to the cardholder’s bank every time a Visa or indeed Mastercard payment is processed.
Interchange fees cover the cost of payments being carried out quickly and securely, and ensure that the retailer receives the payment promptly.
The interchange fee is not something that acquirer can control or have any say in, it is simply a charge that is levied on them for services supplied by the major card schemes.
What is interchanged used for?
According to the Visa Europe website interchange is used to ensure that the global card payment network works instantly and seamlessly at all times.
Other things that it contributes to are:
- the costs of operating card services that banks might otherwise pass onto consumers investment in creating the ease and security of electronic payments that consumers have come to rely on and expect; for example, Chip and PIN and Verified by Visa help reduce fraud and increase transparency investment in the future development and maintenance of the system which in turn allows companies like Visa Europe to make payments faster, more secure and more convenient, such as contactless
How are debit card rates changing in the UK?
Up until March 2015, interchange fees were charged as a small set fee for each payment or as a percentage of each payment for credit cards.
The new changes will mean that debit cards and credit cards will be charged in the same way: as a percentage of each card transaction.
In some cases, businesses may remain on a set pence rate – but this will only be in very rare cases where an arrangement has been agreed between the merchant and the provider.
Why is the change being introduced?
The card payment landscape has seen a major shake-up in recent months as the the European Commission has introduced new regulations which will control the amount banks can charge for card payments.
The cap has been introduced in order to promote greater competition within the card payment market in the UK and Europe. Initially proposed in 2013, the launch of the cap will also give more freedom of choice to retailers, improve transaction transparency and pave the way for new card payment technologies to be introduced.
Announcing the charges, EU Commissioner Margrethe Vestager said: “It is good for consumers, good for business and good for innovation and growth in Europe. As cards are the most widely used means of online payment, this regulation is also an important building block to complete the European Digital Single Market.”
What will the impact be for UK businesses?
The changes will mean that businesses will see a fluctuation in the charges for debit card payments as the new interchange charging structure takes effect.
The overall impact of this change is that debit interchange will be reduced, particularly on lower value transactions for everyday things like food and petrol, from supermarkets, petrol stations and corner shops.
However, it will also mean that some higher value transactions will carry higher interchange costs than they do now.
How much businesses are charged will depend on a number of factors including average transaction value and volume of transactions made across a given period.
What will this mean for our customers?
Paymentsense will continue to provide our customers with some of the most competitive card payment pricing available in the UK.
We will aim to offer existing customers the most affordable debit card rates based on the new charging and will look to provide new customers with rates that are lower that almost any of our competitors.
Our aim is to provide small and medium businesses with affordable and reliable card processing services and we will continue to provide this service in light of the recent changes to the Visa debit interchange fees.