As Visa and Mastercard both contend with a staggering £7.5bn compensation claim, an opportunity may arise for Alternative Payment Methods (APMs) to alleviate consumer dependency on the two major networks.
Harcus Parker is the commercial litigation firm behind the multi-billion pound claim against the two card network giants after months of accusations over allegedly overcharging businesses with their multilateral interchange fees (MIFs).
MIF charges occur when a retail bank pays a fee to a consumer bank for each card payment it processes, which involves two banks, a consumer and the retailer.
It was argued by Harcus Parker at the Competition Appeal Tribunal that the two firms designed the uptick in MIF prices themselves as opposed to due wider market forces.
Whilst a 1.8% MIF charge on Visa and Mastercard transactions does bypass the EU’s 0.3% law, the litigation firm back in October outlined its belief that this should be eradicated.
This may, however, create an opportunity for APM providers to decrease consumer and retail dependency on Visa and Mastercard and open up new avenues for APMs to take precedence.
David Maisey, CEO of MultiPay Global Solutions encouraged retailers to embrace new possibilities APMs can provide. He told Payment Expert: “Beyond the lawsuit and potential compensation, this news is of such paramount importance that it will accelerate retailers’ adoption of APMs.
“Already popular in many European countries, APMs offer an important way for UK businesses to minimise their card processing fees.
“Instant payments, for example, allow merchants to receive their funds almost instantaneously through their card payment devices. Instead of paying interchange fees, merchants would only pay a fraction of the transaction fees paid to the two main card scheme providers, such as Visa and Mastercard.”
Harcus Parker Partner, Thomas Ross, recently told Sky News that Visa and Mastercard MIF charges are “unlawful and should be abolished”, demanding that big and small UK businesses should be “properly compensated”.
As MIFs typically take up as much as 90% of costs for a company’s monthly bank charge, a decrease in this would almost certainly be welcomed by many UK-based businesses.
Despite the Payments Systems Regulator (PSR) finding no “evidence that shows that there have been significant changes in costs” to Mastercard and Visa cross-border transaction fees last August, data shows that consumers are opening up to APMs at an accelerated rate.
According to Statista, digital wallets – a APM function – accounted for 26.4% of all ecommerce transactions in Europe in 2021, with credit card and debit card transactions behind both on 19%.
As the PSR continues to probe the two card giants, Maisey believes that as consumers have become more aware of the potential of APM functions such as digital wallets and instant payments, retailers should also view them as an “exciting opportunity for growth”.
He continued: “Simpler than using a debit or credit card, customers need only to download an app from a bank or retailer to pay for the goods and services they’ve bought.
“With a growing desire from consumers for convenience, especially amongst Gen-Z and millennial customers, all merchants should view the move towards APMs as an exciting opportunity for growth.”