From October, Mastercard will charge 1.5% of the transaction value for every online credit card payment from the UK to the EU, up from the current 0.3%. Photo: Getty Images
Mastercard (MA) said British shoppers will not be impacted as a result of the company significantly hiking up its interchange fees post-Brexit for purchases made by UK consumers from EU-based companies.
Mastercard, as well as Visa (V), charge an interchange fee, typically paid by a retailer's bank to the cardholder's bank. The increase benefits card issuers, rather than Mastercard or Visa. Visa has not yet said if it will follow in Mastercard's footsteps.
The increase in fees comes because the UK is no longer part of the EU and will hence not benefit from the cap on interchange fees set in 2015.
The EU regulation imposed a cap of 0.2% of the transaction value for consumer debit cards, and 0.3% for credit cards. The caps apply to any transaction where both the retailer's bank and the card issuer are located within the European Economic Area (EEA).
But from October, Mastercard will charge 1.5% of the transaction value for every online credit card payment from the UK to the EU, up from the current 0.3%, the FT reported.
It will charge 1.15% for debit card payments, up from 0.2%.
In an emailed statement to Yahoo Finance, Mastercard explained that "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," the statement added.
READ MORE: Court allows £14bn suit against Mastercard in UK's first consumer class action
Meanwhile a Mastercard spokesman told Yahoo Finance "We want to be very clear, UK shoppers will not face any new fees as a result of this change."
He added that the change only applies to e-commerce transactions at EEA-based merchants, and that all physical transactions stay the same, as do transactions made by European cardholders at UK-based shops.
However, consumers could face higher costs if companies choose to pass on this fee to them, adding to the confusion and complications around Brexit.
"Some people might put this change down to Brexit, but it is actually just greed. It is well within the power of the card schemes to make merchants' lives easy and keep things operating as they were pre-2021," the FT quoted Joel Gladwin, head of policy at the Coalition for a Digital Economy, as saying.
"Not only does this hurt the already squeezed bottom lines of ecommerce start-ups and subscription businesses, it comes at a time when a huge number of small businesses have shifted to online models to survive," he added.
Last month, the UK Supreme Court allowed a $18.5bn (£14bn) class action suit against Mastercard to go ahead. Mastercard is being accused of allegedly overcharging more than 46 million people in Britain over a 15-year period.
Britain's highest court decision, which upholds last year's Court of Appeal decision, paves the way for the country's first mass consumer claim of its kind.
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