EU rule change could shatter debit and credit card system warns UK Cards Association

2nd April 2014


The European Parliament is debating proposals that would undermine the structure of the card payments system used by 47 million British consumers, trade body the UK Cards Association has warned.

The proposed changes being debated in the European Parliament today would place a cap on the “interchange fee” – paid by retailers on card transactions as their contribution to the card payments system which provides them with benefits such as guaranteed payments and security from fraud.

The trade body says that the reduced income from retailers will mean that the substantial costs of providing cards, and the systems which enable customers to pay for things safely and speedily, will have to be funded in other ways.

The UKCA says the British economy is particularly vulnerable as the UK accounts for over 30% of all EU card spending, and more than 70% of EU credit cards are held by British consumers.

The trade body says that spending on debit and credit cards in the UK accounts for a third of our national GDP – £532 billion in 2013 across 10.9 billion transactions.

It says the EU proposals will impact card payments, which British consumers have long enjoyed the benefits of since the first credit card was introduced to the UK in 1966.

Melanie Johnson, chair of The UK Cards Association, says: “The EU’s proposals threaten to shatter the system that millions of consumers rely upon every day to buy goods and services. The clear benefits of safety, convenience and flexibility that debit and credit cards offer consumers and retailers are now being put at risk. We are calling on the Government to stand up for British consumers by putting their interests first in this crucial debate in Brussels.”

The trade body says that while some retailers have said the benefits of these changes will be passed onto consumers through lower prices, evidence from other countries across the world where similar laws have been introduced suggests this is not the case. It calculates that even if the entire saving were passed on by retailers then consumers would save just 5p on an average debit card transaction of £45.

The UKCA says a similar study from the University of Chicago in 20132 found that in the US, where similar measures were introduced in 2010, consumers have lost out by up to $25 billion since its implementation.

Earlier this year a coalition of consumer bodies and debt charities issued a joint statement saying they are ‘highly sceptical’ that the gains for retailers will be passed on to consumers in lower prices. The statement from Christians Against Poverty, the Centre for Responsible Credit, the Money Advice Trust, The Money Charity,, and Toynbee Hall highlighted their collective concern of the “unintended consequences” of the proposals.


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