Visa are changing the fees card processors pay for processing Visa debit cards from 1st March 2015. As a merchant, your card processor may pass the effect of these changes onto you.
If you’re processing lots of large debit card payments, you could be in for a nasty shock.
How are Visa Changing Their Debit Fees?
Visa’s change is going to make it cheaper for the card processors to process low-value transactions (under £35) but more expensive (sometimes much more expensive) to process transactions over £35.
Currently, card processors pay a flat 8p to process a standard Visa debit chip and pin payment. From 1st March 2015, that flat fee will be replaced by a fee of 0.2% of the transaction value plus 1p, but capped at 50p.
- A card processor will have to pay 3p to process a £10 transaction (0.2% of £10 is 2p. Plus 1p gives 3p) — much better than the 8p before.
- For a £200 transaction, a card processor will have to pay 41p (0.2% of £200 is 40p. Plus 1p gives 41p) — a very steep increase from the 8p before.
Note that these prices are for standard UK Visa debit card payments using chip and PIN or contactless. Processing prices are higher for premium cards and for payments made online or by phone.
What do the Visa Debit Fee Changes Mean for Merchants?
It’s important to remember that the changes described above apply to the fees paid by the card processors (companies such as Worldpay, Global Payments and Elavon.) The fees you, as a merchant, pay for card processing will be considerably higher, including your card processor’s markup.
Unless you have agreed pricing known as ‘interchange plus’, your card processor will not be under any obligation to pass any increases or decreases onto you.
Some card processors may use this pricing change as a cover to increase their margins. Others may not pass on the full benefits of lower fees to their customers.
What Can I Do If My Visa Debit Fees Are Changing?
If you’ve received a letter from your card processor about upcoming changes to your fees, it’s worth looking closely at how they’re passing on the changes in their pricing onto you and whether they’re doing so fairly. You will typically have a window of 60 days during which you can get out of the contract (though in some cases a termination fee may apply). You may be able to use this to negotiate better terms with your current provider or move to a provider who is offering a more competitive rate.
Leave a comment below to tell us if you have received a letter from your provider. We’ll be interested to hear what they are proposing and to see how it compares to the market as a whole.