News & Insight

The card surcharge ban hasn't worked - and the high street is paying the cost.

Oliver Jones

The Visa-Mastercard duopoly are profiting at the high street's expense

When the government announced its ban on card surcharges earlier this year, the idea was to protect consumers from hidden costs and help them make more informed decisions.

But with both Visa and Mastercard increasing their card fees – in some cases doubling them – traders are being forced to raise their prices to cover the cost. That means all customers are paying extra, whether they use cash or card – and most of them don’t even know it.

Hidden costs

Most customers are not aware of how much it costs retailers to process card payments. Plastic use has now overtaken cash in both transaction quantity and total value. Consumers have started paying by card for even the cheapest items, as contactless payment makes purchases almost instantaneous.

But it’s convenience that comes at a cost. Britain’s dependency on Visa and Mastercard – who between them own more than 60% of the whole UK card market – means that shops risk losing the majority of purchases if they try to opt out of the fees.

Worse still, neither Visa nor Mastercard disclose their card scheme fees, making it hard for traders to work out how much each transaction costs. It’s harder still for regulators trying to break up the duopoly – without numbers, it’s hard to build a case against fee hikes.

The PSR (Payment Systems Regulator) estimates that the cost of accepting card payments is 5-10 times greater than accepting cash. It also predicts that Visa and Mastercard will have a 90% market share by 2026.

New technologies

That may be set to change in the future though, as an increasing number of providers eat away at the fringes of an increasingly expensive Visa-Mastercard duopoly.

Online payments are the most competitive, with companies like PayPal, BillMeLater and PayNearMe all providing ways to pay for things without using a card (though most users simply use their cards anyway, providing card details rather than bank accounts).

Innovations are also coming from mobile payment providers. As with everything mobile, the potential for payments performed through smartphones is enormous. PayPal, Amazon Payments and Google Wallet all offer “mobile wallets”. In Google Wallet’s case, it’s actually more expensive to add money from a card than from a bank account.

But as these systems require customers to input PINs - at least for their first transaction with a business - they aren’t yet as convenient as contactless.

Keeping costs down

While there’s not much shopkeepers can do about Visa fees, there is scope for lowering costs by going with the right payments provider.

Though small businesses generally feel short-changed by their terminal provider, competition is actually much fiercer in this area, with most major banks and dozens of other platforms offering both on and offline payments.

At XLN Pay, we offer small business-exclusive deals on card machines and portable payments, and our price promise means we’ll beat whatever price you’re paying now. You can find out more at