Payment method surcharges banned – will online merchants have to pay card companies' fees?

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Written by: Pekka Majaniemi - 18 April, 2018

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With the revised Payment Services Act, the payment method surcharge associated with credit cards has been banned. Merchants can no longer make consumers pay the card companies’ transaction fees. What do you need to do in your online store?

Since the EU’s Revised Payment Services Directive, or PSD2, came into effect January 2018, the Finnish National Payments Service Act will also be revised to meet the directive requirements. The new legislation will result in many changes, one of the most significant is the ban on payment method surcharges.

Stores are no longer allowed to add a surcharge when the consumer pays using common debit or credit cards, i.e. Visa or Mastercard.

Previously, merchants have used the payment method surcharge to safeguard their own profit by having the consumer pay the fixed transaction fee and the payment service provider’s commission.

“Restricting surcharges for card payments is intended to protect the consumer’s interests,” says Paytrail’s chief economist Kari Melender. “PSD2 in general is about offering consumers affordable and efficient payment services.”

The payment method surcharge feature was removed from Paytrail’s service

Since the revision is new, some online stores may still have a payment method surcharge. The news of the requirements may not have reached everyone, or perhaps merchants haven't yet realized the implications of the revision on their own business.

Paytrail has informed online merchants within our service of these legal changes and removed the payment method surcharge from our service. For now, removing the payment service surcharge is up to the merchant.

It is still possible, however, for merchant to apply a payment method surcharge by adding it in manually during the checkout stage of their online store.

In the future, the payment method surcharge may be included in the price of products

From Kari Melender’s perspective, the payment method surcharge ban will not have a major impact on Paytrail merchants, which are mostly small or medium-sized enterprises.

“The payment method surcharge ban won’t be a blow for the ordinary online merchant. You just have to think holistically,” says Melender.

Merchants have previously been able to define the payment method surcharge themselves, which has given them the opportunity to increase it to earn additional income. If you’ve been increasing your profits through the payment method surcharge, the change might affect you a bit more.

”The merchant has to recalculate their profit in their own business case. The expense could be covered by adjusting product prices evenly throughout the product selection,” Melender explains.

The payment method surcharge ban impacts different industries in various ways

“The effects of the payment method surcharge will be more apparent in industries where products are typically paid for by card. For the consumer, the ban will probably be most obvious in the price of airline tickets,” Melender estimates.

Airlines traditionally have had relatively large surcharges for card payments. For example, the payment method surcharge for Finnair has been 10€ and for Ryanair, as much as 15€.

Flights and travel packages are often paid for using Visa or Mastercard, because card companies offer the consumer a payment method insurance: if the airline happens to go bankrupt before the trip, the price of the cancelled trip will be refunded.

The consumer watches the online merchants

“For now, removing the payment method surcharge is up to the merchant. If they still want to apply it, it’s hard to do anything about it. Most likely, they will eventually get contacted by their bank, or the consumer might complain to the Competition and Consumer Authority. I haven’t encountered clear sanction practices yet,” Melender contemplates.

According to Melender, it seems unlikely that card companies themselves would monitor the payment method surcharge ban.

“Obviously, it’s in the interests of card companies to make offering their cards as a payment method also attractive to merchants,” Melender analyzes.

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