MasterCard to push up fees for UK purchases from EU due to Brexit
bbc.com
bbc.com
"From October, Mastercard said it would increase these fees to 1.5% on every transaction, up from 0.3%. The EU introduced a cap on such fees in 2015 after concerns they pushed prices up for consumers and unfairly burdened companies."
"Mastercard is implementing the rises simply as it's no longer bound by the restrictions imposed by the UK being in the EU."
Thus proving the caps were indeed necessary. If MC was making money with a 0.3% fee the other 1.2% are pure sweet profit margin.
It is more likely there are significant regulatory or other burdens taking UK orders for EU goods.
Also, I think it's important to remember but most of us don't go and select Mastercard or Visa, most of us don't care. We just use what the banks use. I suspect changing from Mastercard to Visa would be extremely expensive and it's a lot easier and more profitable to just pass along that to the customer.
You got the consumer part wrong. The consumer is the merchant, which can decide if they allow Mastercard cards or not. Same as many merchants don't accept Amex. It's because they don't like to pay the Amex fee. Same as many merchants don't accept Apple Pay or Android Pay or why some merchants only allow card payments for purchases of a minimum amount.
Merchants are the consumers and they decide what cards they will accept. Based on what cards they will accept consumers will be picky about which cards they want to have. For those exact reasons I have a VISA credit card as well as an AMEX because I sometimes can't use my AMEX, otherwise I wouldn't even have a VISA CC.
Also Apple Pay and Android Pay don’t cost merchants more to implement or use (assuming they have the HW, which any card reader from the past 10 years will have). The card network rules also forbid merchants from not accepting them, but of course rules don’t mean much without enforcement.
Finally there is really only one company that can undercut Mastercard, and that’s Visa. It’s only a question of time before Visa bump their fees, there’s no way they’re gonna leave money on the table for long.
Is it also legal to charge customers a fee based on what type of card they use? A large number of customers have multiple cards anyway, so that would be a meaningful incentive.
Are we living in the same world? Visa+MC are a duopoly borderlining being a de facto cartel organization and handle the vast majority of all retail transactions in the world.
The margins are extreme, but so are the barriers to entry. To build a new card network you somehow need to convince a bunch of banks and merchants to support your card network. Good luck with that.
The EU even forced Mastercard to allow others to start a card network running over their infrastructure, after they bought EuroPay. But it’s so hard to get people to actually use a new card network, that no ones actually bothered to try.
Weren't they supposed to have turned all existing EU law into UK law anyway as a starting point? Maybe phone operators will be next on this train.
I also don't understand how this 'free trade' deal seems to still be costing businesses so much money in customs fees? Isn't the point of a free trade deal that you don't pay customs?
At least Boris Johnson got the Coronavirus pandemic right, oh wait...
The free trade agreement is different, and a step down from that. Given the amount of trade I think the customs fees will come down significantly over time once things are bedded in a bit more.
they were supposed to transcribe all the EU regulations and law into UK law, but they also granted themselves power to change lots of it via regulation (ie without going to parliament)...it's unclear what specifically happened here.
On the other hand, there are many cash back bonuses.
The EU has so much bargaining power that countries like the UAE or Israel could never get hold of more vaccines than the EU -.-
The EU has a population of about 447 million.
Seems like these two countries are 2% of EU in terms of population.
If I have 5000 guests, I have to find a beer maker who can make and deliver 5000 beers by a given date. The difference in the challenge is obvious, to any rational observer.
But sure, from far enough, both things can be described as "buying beers for guests".
It's about as apples-to-oranges as you can get.
What happened is what always happens when you really want something but are not in a position to negotiate: You end up paying a lot of money. Israel is said to be paying $47 for the Pfizer vaccine while the US are paying $19.50, and the EU... $14.76. [1]
[1] https://www.timesofisrael.com/israel-said-to-be-paying-avera...
It can only be in the shipping cost.
Also if you are a British consumer simply pay in Euros, and let your card do the conversion for you - you typically get the interbank rate with most modern banks.
I suspect it'll also force many smaller retailers to stop taking card payments again, and requiring cash.
It seems to me that merchants are paying a ton of money in card fees and waiting 2-3 days for the transaction to settle) whereas actually the transaction could be done for pennies and settle instantly via the UK's very good Faster Payments infrastructure. If this takes off with consumers, Visa and MasterCard are going to see big chunks taken out of their business.
That being the case this is just a matter of increasing the price even more for UK customers (or EU customers in the UK), should a business decide it makes commercial sense.
So the loser seems to be UK shops.
Hmm, the cap is necessary if the fees are abusively high and hurt businesses, consumers, and competition, not just because people prefer to pay less.
I don't see how a change from 0.3% to 1.5% proves anything, especially that this is still abiding by the cap set for non-EEA transactions: The UK is no longer in the EEA so they have decided to apply that cap instead of the intra-EEA one, as is their fair and legal right.
Only a narrow political class of Brexit true-believers are doing that, and it seems unfair to say they represent the UK in totality.
There are plenty of voices in the the UK who've warned about the economic consequences and even now are shining a light on the consequences of Brexit.
That happened once and people were right to be furious because the Dutch customs guy was a dick. No rule requires him to confiscate the lunch of lorry drivers and then say "Welcome to Brexit". It's that kind of nasty backstabbing pettiness that makes EU ideology so deeply unattractive that the UK voted to leave.
Nonetheless it's hilarious that so far despite the EU's best efforts to create as many problems as possible via "work to rule" type approaches, the media focuses on that. The EU-loving media class spent years telling people that if the UK dared to leave this horrible organisation there'd be immediate shortages of medicine. Now they have to hype up stories about dickish border guards whilst desperately trying to hide the fact that literally weeks after Brexit happened there are medicine shortages in the EU. People who argued against Brexit have been wrong about so many things so far I shouldn't be surprised but that one still takes the biscuit.
Actually, a rule does require him to confiscate any meat product that someone might try to bring into the EU [1] (incidentally I believe that the USA have the same rule), which is what happened: It was a ham sandwich.
If you watch the video the driver was very surprised. Personally I took the customs guy's reply "welcome to Brexit" as a humorous but factual and to the point explanation.
[1] https://europa.eu/youreurope/citizens/travel/carry/meat-dair....
Look, this is very simple: if the EU's rules require confiscating the lunch of people who are trying to do business, then the rules are wrong and should be fixed. Blaming Brexit or saying "the USA does it too" isn't a great answer when it'd be so easy to fix this.
I think the main thing I've been learning about import/export rules in/out of the EU in the past few weeks is how much life must have been sucking for years for people trying to trade with us who aren't physically in Europe. A huge number of the rules that are tripping people up are stuff that's just taken to an absurd bureaucratic extreme, like the guys who couldn't sell their fish because the Latin name on a form had a spelling error, or the others who needed to translate their product description into every single European language before they could put their goods on a lorry.
The EU could easily fix all these things and make the lives of not only Brits but everyone else easier too, but the so-called single market is basically the only argument they have for why a country should join the EU. The EU has created a perverse incentive for itself to make selling things to it as convoluted and painful as possible. That is ultimately bad for everyone, but especially for people who live and work in member states.
How did Covid start and spread? Through movement of infected meat and people. I also think you really don't understand the job of a border controller.
As for spread of people, truckers have been allowed to cross borders even when they've been closed the whole time, as otherwise supply chains would collapse. So it's irrelevant to this case. The guy wasn't doing a COVID check.
I also think you really don't understand the job of a border controller.
I think I do! Political trolling and lunch confiscation are definitely not components of it.
This is not something I or any other sane American can fix. It will take generations to root out this nonsense. Until parents/communities stop teaching their children bigotry and racism and scarcity mindset are good - we will lose this battle. It starts with the kids.
And, I think we will really know after a couple of years if this was a “mistake”. Being in the EU feels often like a “mistake”, too. I am not thinking my country should leave, but I’d love to see a major reform making the EU much lighter, less bureaucratic and focused on core topics instead of being this gigantic monster that’s deciding which popups I need to see.
The choice of matters discussed at EU level is sadly due to the agenda of national states, for the major part; in a lot of cases it’s actually what they don’t feel brave enough to touch but still think “something should be done about”, so the EU provides plausible deniability. If you feel this is not to your likes, complain to your MEPs and your national MPs.
Personally I think some issues won’t be solved until we have more European authority rather than less; a bit like the US ended up moving most powers to the federal government during its first 150 years.
This might very well be true. However, it is not only about costs, is it? I really doubt that the cost-benefit ratio is on the same level as my national one.
https://en.wikipedia.org/wiki/File:Graham%27s_Hierarchy_of_D...
https://www.theguardian.com/politics/2021/jan/24/scotland-in...
If there is any truth to that it's a big vindication of Brexit and I say that as a remain voter.
The loss of the UK is nothing but a sad occasion, because everyone in the UK and the EU is weakened as a result.
Everyone on this thread is jumping to the conclusion its some Brexit mania without looking into the detail of who receives the interchange and who pays it.
The big ticket items there will be VAT, and customs duties, which are measured in 10’s of %. So realistically customers will never know to complain about this fee increase once the news cycles ends.
If Open Banking takes off, then expect MasterCard to start increasing their Faster Payments fees (they exist, your bank just eats the cost).
But first you need to convince customers to give up the protections offered by Debit/Credit cards. There’s basically 0 recourse for a consumer to get their money back if they’re scammed via Open Banking. Unlike Credit/Debit cards where chargebacks are an option.
There are bigger issues at play set out for this coming decade. For example card not present transactions are going to have their fees jacked up (internet transactions) vs in store ones. The real battle will be against this.
Chargebacks not being possible are beneficial too, it depends on your merchant. For instance topping up your brokerage account with chargebacks possible would be very problematic.
What on earth makes you think this is true? Do you have any idea how complex it is to set up an inter-bank payment scheme? Vocalink are not even remotely easy to supplant, banks will just pass the extra costs onto merchants and wash their hands of it. There’s no profit in providing free financial services.
> For example card not present transactions are going to have their fees jacked up
No doubt. MasterCard and Visa are both looking to make sure profits stay healthy. But if there’s something I know for sure, it’s that both companies know how to extract their pound of flesh. They’re masters of creating new fees, if they want to increase fees on card not present, then they will. If they can’t do it directly, they’ll find a way to do it indirectly.
> For instance topping up your brokerage account with chargebacks possible would be very problematic.
Chargebacks are not a simple one-size-fits-all thing. There are hundreds of pages of rules outline when you can and can’t raise chargebacks. There are also ways to allow merchants to immunise themselves against chargebacks.
It’s already possible to top up brokerage accounts using a Credit/Debit card. That’s because carve outs already exist in the chargeback rules which make it very difficult for a customer to raise a valid chargeback in those scenarios.
I know this industry quite well. Btw, this has already happened. NPSO now runs Faster payments not Vocalink anymore. Vocalink sells the stuff to banks to connect to NPSO & that helps square up card transactions too. You can also connect to NPSO directly using documented open ISO standards and not pay Vocalink anything.
[1] https://www.bankofengland.co.uk/news/2018/may/consolidation-...
It’s true that Pay.UK sets the participants fees etc But it’s not hard to see them increasing them to help deal with fraud costs if Open Banking payment initiation takes off. I know this because I was involved in preventing the fees from being increased that last time this was proposed.
You can also bet money that MasterCard will use their ownership of VocaLink to find a way to increase their cut of FPS fees.
Custom fees are the big problem, which is basically profiteering from Royal Mail and co. I really doubt it costs £8-12 to clear a small package through UK customs (especially long term when the systems are bedded in more). For example, Amazon doesn't charge customs duties on goods from the EU coming into the UK, so my guess is it is actually very low cost. My hope is that over time there will be some competitiveness on customs fees.
For one, it takes longer to clear packages, which increases your storage costs; and if a package is refused it cannot be sent back, it has to be stored for a very long time, again impacting profitability (you now need bigger warehouses).
Also there are additional checks, so more people involved - the relevant UK civil service has already expanded to deal with the increase in volume of bureaucracy, but actual couriers have not. That means they will be forced to hire more people, again raising costs.
That high cost of handling international custom-clearing packages is an average of actual immediate costs and predicted future costs.
Amazon is either eating the costs (possible, granted, but odd as they don't do it for other countries) or have got costs so low to clear that they're not charging customers for them. £12 to clear a small package is obviously way over the actual cost incurred by the delivery companies.
I don't understand how the price can be the same if the currencies are different.
Also btw if you let your card processor convert currency for you they're going to be even worse off as an EU store owner - Stripe charges 2% extra to convert your currency for example. So your fees are now going to be over 3.5%.. best to leave it in EUR.
You need to run an ecommerce store to understand its very hard to ask a customer their country first. Unless you're Apple..
Also when you run an ecommerce store you want US customers too, so your UK problem is equivalent to your US problem.
Geo filter? I'm not sure what commerce store you are running, but that's usually the first thing that's happening.
Anyways you can set shipping costs however you want for each country.
These are all trivial things.
Mobile roaming fees will be the next thing to go up. We voted for this, and the EU is laughing at us. (Who can blame them?)
That's not my experience. Most people express sympathy. I think many people in the EU and EEA regard the UK as a sibling or cousin who has inexplicably taken to self harming.
I assure you we're not, most of us aren't at least. I feel sorry for everyone involved, including the EU.
I think the "throw that form in the bin" from B. Johnson last year was a low point of politics everywhere in the world and was a tell of a profound lack of empathy. I know some people will feel deseperate because of the new barriers (the Covid crisis did not help at all tbh), and luckily this one sentence is old enough so that not that many people will remember, but this is the kind of "advice" that can push a desperate person a little bit too far.
"I'm just joking" doesn't really work when you're an adult.
Maybe that's true. Either way, I'm yet to see the promised benefits. I doubt they'll ever exist.
Same thing happened when EU tried to cap roaming charges and Vodafone complained that it was unfair because they'd paid so much for mobile spectrum licenses - the UK government lobbied not on behalf of citizens but on behalf of a corporation AGAINST caps on roaming charges.
There is one cap for intra-EEA transactions and one cap for extra-EEA transactions. The UK is no longer in the EEA so they have decide to apply the latter cap to these transactions.
It is entirely legal for a company to charge different prices in Germany and Greece, except if they're a phone operator. How is that fair?
It is absolutely fair, mobile operators were cross-charging ridiculous amounts to serve each others customers just so they could each milk the others customers. This type of price fixing was wrong and the EU put an end to it.
As far as I can tell the telcos have survived, they're still making money and investing in 5G and the consumers are paying less. How is that not a win-win other than for shareholders of the biggest telcos?
Except this isn’t true. The EU mobile roaming rules have the concept of a home country. If you spend too much time outside of it then the operator is allowed to charge roaming costs. So it not really possible for a customer to take out a contract in Greece and then only use it in France.
The only exception to this rule exists for people living near borders. Where is quite likely they commute over that border, or their phone will randomly connect to towers on the other side of border.
Given the most of the EU is part of the Schengen Area, and living and working in different countries is not only common, but encouraged. It makes sense that EU enacts laws to prevent citizens from being economically punished for exercising their rights.
The "downside" (from an US point of view) on this cap is that European credit cards don't have ridiculous card bonus programs that are in reality subsidized by all people not paying by credit cards.
I used to work in a PC retail/repair shop and the reason we didn't take amex wasn't because of the fees, it was because they held the balances for longer than Visa/MC, and occasionally we had bills to pay in that time period too!
For Mastercard/Visa you will have at lease three entities involved:
1. The retailer
2. The card network Mastercard/Visa
3. The card issuer (the customers bank)
Amex dodge this by being both the card network and the issuer. So there are only two parties involved in their transactions.
1. The retailer
2. Amex
So they charge a much higher interchange than Mastercard/Visa can. Which is also the reason why there will never be an Amex competitor in Europe. No merchant would ever sign up to anew card network that charged more and had no customers. Equally no customer would signup for card they couldn’t use anywhere.
For most people not having to deal with the details makes Stripe worth it. But once to get to a certain scale it becomes much cheaper to use a competitor, and just have people working full time on understanding and managing the fees involved.
I've never even had a credit card. I just have a debit card that allows me to spend the money in my account (plus a limited overdraft of about €1000). I've never seen the point of anything else and I'd be suspicious as hell if a bank offered me a credit card with a reward program.
It's actually pretty reckless using debit cards for larger purchases for this reason, especially given the current economic climate. You should (IMO) always pay with a credit card then pay the full balance off via direct debit every month.
U.K. retailers gain an advantage over E.U. retailers.
Luxemborg's advantage over the U.K. as a corporate HQ location has decreased, which will make it easier to get companies like Amazon to re-locate or open a second office.
Higher costs will incentivize building better payment systems that break the current duopoly.
But this fee cap wasn’t a directive? What other EU regulations were never directives, and are going to evaporate now we are post Brexit?
Now having to pay import duty/VAT on EU imports plus a ~£10 handling fee for delivery company handling.
It seems like the cost of living is increasing.
So we don’t pay for tariffs, but there still plenty of other trade barriers that exist. Such as paying to have your goods checked as the cross the border. Or paying VAT as it crosses the border because we’re no longer part of the EU VAT system.
The deal we got is basically one notch short of the hardest possible Brexit. It’s barely a deal, just a face saving piece of toilet paper for Boris to cover himself with.
I think a fair conclusion is that the government didn't have interest in getting a good deal or sorting out potential issues.
https://amp.ft.com/content/cc6b0d9a-d8cc-4ddb-8c57-726df018c...
Originally “Hard Brexit” meant leaving the Single Market and Customs Union, but May made doing anything less than that into “Brexit in name only” with her limited time in office. The final deal has the U.K. out of both, with some options for tariff-free trade if you filled out the right forms, but there aren’t enough customs experts to fill out all those forms even if it was a zero-cost exercise.
However this is just an interesting aside; regarding MasterCard fees, the explicit point of Brexit was to no longer be bound by EU rules, and so the UK (with huge caveats yet to be fully explored because the agreement has been TL;DRed by the U.K. government) is no longer required to follow rules like the one MasterCard IDs referring to here. (Probably. It’s a long document).
Now, as a country we do import a lot from the EU. The direct impact is on businesses, which might have a knock-on effect on inflation unless or until alternatives are found.
I wonder what all the EU citizens think who are not getting vaccinated because the EU thought it would play hard ball with the drug companies, who basically went elsewhere as they don't care about EU bureaucratic games?
What do you mean? Current vaccination plan is 80% of population by summer, isn't it?
For all the many times the UK dropped the ball over this pandemic (and separately over Brexit), the British health systems — both NHS and private — are actually good at vaccinating people. For example, last time I visited friends in the country, I got a seasonal flu vaccine from a supermarket without an appointment.
Equally, any EU member state could have chosen to go their own way. The EU didn't force them to collectively bargain to (successfully) get better value deals.
Maybe the EU will do a worse job distributing, but it's too early to say.
(As a Brit, I'm pleasantly surprised how smoothly our vaccine roll out is going so far!)
You think it's an anomaly that EU countries are below UK and the US (despite the publicised failure of the Trump regime to plan for this)?
[1] https://www.politico.eu/article/angela-merkel-defends-joint-...
* Is it Schadenfreude?
* To highlight what EU regulations entail, here a limit on internal fees?
* Is it the reliance on large financial provider networks and an insight in their fees?
I am kind of curious, maybe because I feel that Schadenfreude posts (which was the main reaction when I saw it on reddit) are not exactly the content I expect on HN, but it is not my place to decide that.
edit: restructure comment in an attempt to highlight that this is not just "You shouldn't feel Schadenfreude".
Visa and Mastercard's defacto monopoly is a huge issue for many startups, and therefore this is directly relevant.
I think a head of steam is beginning to build that V/MC is a situation that cannot be allowed to continue as is.
Personally I see issues for consumers on the one hand and companies that provide goods or services that are deemed "not acceptable" by the duopoly. So I'm interested in the issues many startups have.
Regarding the article, as far as I found out by googling a bit, they basically rais the fees to their non-internal-EU fees. (But that might not actually be the case.) So it feels less news worthy to me.
UK founders for one need to be made aware of this since it likely impacts their business directly. But also, from an economic perspective I find it very important as it highlights that MasterCard is in such a controlling position that they can price hike like this (and possibly more) as soon as they're able to, possibly indicating a lack of competition in the space. It's an interesting example of how consumer-helping rulesets are needed since clearly MC was doing fine before this hike.
> fees it charges EU merchants when UK cardholders buy goods and services from them online
But I get the idea, it's interesting to founders in the EU that want to sell to UK for a relevant part of their business.
If I got it correct, master card is basically returning to the fee set that is valid outside of the EU, aren't they? (1.5% compared to 0.3%) which was based on a regulation from 2015 (and there are other payment options that are even cheaper in that regard.)
I do strongly belief that it's a sector that needs regulations like this, but I also feel that this lesson has been available for awhile and is ignored on purpose (e.g., on philosophical reasons such that regulation should be avoided for ineffectiveness reasons)