Visa Inc. (NYSE:V) and MasterCard Inc. (NYSE:MA) have accused of exploitative fees to merchants using their services.
Card operators exploiting merchants with high fees
According to the British Retail Consortium (BRC), the card operators have reportedly doubled the fees they charge retailers in the past two years. BRC says that unless the government acts, retailers might be pushed to passing the additional costs to consumers, which will add around £40 to their bills annually. Andrew Cregan, the head of finance policy at BRC, said that it is important for the government to act and tackle these exorbitant card costs.
Cregan explained that if an energy or phone company increased their fees by almost double, there will be uproar. He said that the companies’ actions are a blatant abuse of the companies’ dominant market position. He said that the companies are the most profitable globally, and they have got retailers over a barrel.
The BRC now wants the Competition and Markets Authority (CMA) to conduct an investigation. According to the organization, a 39% and 56% increase in 2017 and 2018, respectively measured as a percentage turnover, is a clear indication of market dominance abuse. Their figures indicated that the average cash transaction cost to a retailer was 1.42p, but payment by a credit card cost 18.9p while a debit card cists 5.88.
MasterCard and Visa deny allegations of exploitation
A MasterCard spokesperson said that the BRC findings did not represent the payment industry’s facts in the UK. The spokesperson said that the UK enjoys highly competitive payments systems that have been designed to simplify the making and receiving of payments. Digital payments are an effective way of making and receiving payments for entrepreneurs, which are less costly. MasterCard added that BRC members pay less in accepting a like-for-like MasterCard transaction compared to five years ago.
On the other hand, a Visa spokesperson said that Visa enables several merchants across the UK to enjoy the benefits of digital payments. This is by giving them the ability to reach billions of customers in local communities and globally.