Small businesses will be banned from charging fees for card payments from next year.
The move comes as the UK begins to implement an EU directive aimed at increasing transparency and fairness around consumer payments.
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Currently, merchants often make large surcharges for payments made typically by credit card. The government does the same, with charges being made by HMRC and the DVLA when individuals settle tax bills or renew their car tax.
But these fees will be banned from January 2018, in a move that the government suggests could save consumers around £473 million a year.
Announcing the new regulations, economic secretary to the Treasury Stephen Barclay said: “Rip-off charges have no place in modern Britain, and that’s why card charging in Britain is about to come to an end. This is about fairness and transparency.”
Loss to small businesses?
However, the new rules seemingly don’t take into account the large charges made on merchants by card providers. American Express and PayPal levy unusually high surcharges, and it appears that merchants will now be expected to absorb these, potentially resulting in higher prices for consumers.
Speaking to the Guardian, MoneySavingExpert managing editor Guy Anker said: “We expect some companies will raise prices for all to compensate for the loss, which could hit those who currently pay in cash.”
Rise of ‘Open Banking’
The new regulations are part of a wide-ranging change to some of the fundamental principles of banking across Europe.
The raft of measures, known as Open Banking, are intended to increase transparency for consumers, and to end the monopoly on user data currently held by the major banks.
This week a series of grants were made to financial services startups to help them develop solutions that make the most of the technology introduced by Open Banking, which will enable service providers to access data previously held only by consumers’ banks, provided that they have the account holder’s permission.
The implications of this technology could be wide-ranging, including better pre-approval for consumer and SME credit. It is also thought that it will make life easier for those who are looking to switch service providers, by tracking spend on things like energy bills and subscriptions and allowing financial service firms to suggest cheaper alternatives.
Would you be happy sharing more financial information under Open Banking? Let us know in the comments.