Mastercard to raise interchange fees

Mastercard has announced it’ll increase the interchange fee for card-not-present consumer transactions between UK issued cards and European merchants using acquiring services based in the European Economic Area (EEA) to process payments. The fee increases will come into force on 15 October 2021.

From that date, European merchants will pay a 1.5% interchange fee on consumer credit card transactions initiated by UK cardholders that are processed in the EEA. The current rate is 0.3%.

The interchange fee for consumer debit card transactions initiated by UK cardholders and processed in the EEA will increase to 1.15%. The current rate of 0.2% per transaction.

Mastercard interchange fees for card-not-present consumer transactions between UK issued cards and payments processed in the EEA

What interchange fees will merchants using EEA-based acquiring services pay when accepting online payments from cards issued in the UK after 15 October 2021?

Mastercard interchange rates will be revised to 1.15% for debit cards (currently 0.20%) and 1.50% for credit cards (currently 0.30%) for online consumer transactions between UK issued cards and merchants using EEA-based acquiring to process payments.

Why is Mastercard increasing interchange fees for online consumer transactions between UK issued cards and merchants using EEA-based acquiring services?

Mastercard is increasing the interchange fee because of the UK’s decision to leave the European Union on 31 December 2020.

As a result of the decision, online transactions between UK issued cards and merchants using EEA-based acquiring services to process their payments are classed as ‘inter-regional.’ These fall outside the scope of The Interchange Fee Regulation (IFR) introduced by the European Commission (EC) in 2015/16. This regulation caps interchange fees in the EEA at 0.3% for consumer credit cards and 0.2% for consumer debit cards.

Mastercard’s revised fees align with the cap for non-EEA cards used for online purchases in the EEA.

Is Mastercard increasing its interchange fees on any other transactions?

No. For EEA-issued cards used at UK merchants, the interchange rates will remain unchanged. Mastercard will continue to apply 0.2% and 0.3% for consumer debit and credit card transactions, respectively.

For Non-EEA issued cards used at UK merchants, the interchange rates will also remain unchanged at 1.15% and 1.50% for consumer debit and credit card-not-present transactions.

Will the increased interchange fees impact Mastercard commercial card transactions?

No. The interchange fee increase only affects card-not-present consumer credit and debit card transactions. Commercial cards fall out of the scope of the IFR regulation.

Is Visa increasing its interchange fees for card-not-present consumer transactions between UK issued cards and merchants using EEA acquiring as well?

Visa is yet to announce any post-Brexit pricing updates as of 29 January 2021. But the scheme has confirmed that “should any change to interchange or pricing be appropriate, Visa would aim to provide clients advance notice to help them plan — typically at least six months.”

What merchants will the interchange fee increase impact?

In a statement, Mastercard has said: “In practice, only EEA merchants making e-commerce sales to UK cardholders will see a change.”

European merchants with an entity in the UK can avoid the rate rise by using a UK acquirer to process payments from UK issued cards. Prcoessing payments in the UK will see them charged the Mastercard's UK domestic interchange rate. This interchange rate is 0.3% for credit card transactions and 0.2% for debit card transactions currently.

What can European merchants do to minimize the impact of the fee increase on their revenues?

As mentioned above, if a business has a UK entity, it can use local acquiring to process payments from UK issued cards. Doing so will give access to the UK’s domestic interchange rate — among many other benefits.

With the rate increase not coming into force until 15 October 2021, merchants have an opportunity to assess the impact on their business and develop a strategy to meet their unique circumstances.

We’re ready to support you and can offer your business direct access to local acquiring in the UK, Europe and around the world. Get in touch to find out more.