Surcharging hit the headlines again. It was triggered by the Treasury’s response to consultation on PSD2 implementation. In fact PSD2 will have far-reaching impact.
Businesses accepting consumer payments wouldn’t paint the charges as ‘rip-off’ fees. They are simply one a factor in covering cost and delivering margin for the goods and services sold.
In truth the ban is yet another challenge to overcome in the rising cost of doing business.
So how should businesses plan for the ban? Our specialist Banking and Payments team shares some initial thoughts.
- Many trade associations have been consulting the Treasury, card schemes and supply chain. Seek guidance from any trade body you belong to.
- Consider replacing lost surcharge revenue with new or increased ‘administration’ or ‘booking fees. Not all markets and regulation will allow this. Take care not to fall foul of challenges for surcharging by another name.
- Keep an eye on the media and consumer behaviour. Will publicity from the ban make administration and booking fees ‘toxic’? Will the lowest headline price with these added fees be more attractive?
- Assess what the true cost of the ban will be. The industry expects consumer behaviour to change following the ban. This will impact costs even for those that don’t currently apply surcharges. ERA is already seeing some suppliers pricing proposals with hidden cost time bombs. These would have increases costs by over 30% on the back of these expected changes. Detailed analysis and modelling is essential.
- The ban covers all retail consumer payment types. So not just Visa and MasterCard but PayPal, American Express and others.
- The decision on your response should not sit only with finance. Involve finance, marketing and sales and IT. Find a commercial decision balancing competitive pressures with the need to protect margin.
ERA’s Payment professionals reduce costs and maximise revenue through optimising payment solutions.
For more information, please contact us.
Article by: The Banking & Payments Team