Visa’s decision to increase interchange fees for UK customers following Brexit is likely to have a significant impact on merchants, as they look to ensure recovery from a turbulent period. 

According to Sky News, the fees are set to be elevated to 1.15% from 0.2%, which is likely set to lead to price increases throughout the continent. 

Neil Smith, Head of Strategic Partnerships UK, EMEA, APAC at Forter, commented on the latest steps taken by Visa: It’s likely that the reason for this change in fee structure is that card networks have seen a significant drop in cross-border transactions, which already carry higher fees than domestic transactions. This is likely to have had a material impact on revenues. Visa reported 29% fewer cross-border transactions in Q3 2020, while Mastercard reported 36% fewer, and recovery has been slower than anticipated. 

“By raising interchange fees for EU merchants doing business in the UK, they will be able to recover some lost revenue, as the UK is no longer protected by EU regulation on fees.

“As the UK is a net importer of goods from the EU, the unfortunate consequence of the hike in interchange fees is that the cost will mainly be felt by UK customers who are buying from European merchants online.

“Merchants with already narrow margins will feel the pain most, so this is likely to hit travel and hospitality hardest – terrible news for industries who have had a difficult 12 months and whose recovery will be further hampered by additional pressure on already tight cashflow. Many of them will inevitably feel that they have to pass the costs on to their customers because they just can’t afford to absorb them.”

It follows the announcement that Mastercard would take similar steps earlier in the year, as a result of Brexit, with it increasing charge fivefold. 

At the time, the bank stated: “The banking giant cited the UK’s departure from the EU as the reason the rise had to be implemented, stating: “As a result of the UK leaving the EEA, Mastercard will adapt interchange rates on UK cards to the commitments it gave the European Commission in 2019 for non-EEA card transactions.

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