Shake up expected in banking

Under new European plans to scrap or cap the fees which underpin the system of paying with a card, we could see the end of free banking. Experts are warning that the planned reforms could lead to consumers paying for using a credit or debit card, with such things as interest free periods, rewards and cashback quickly becoming things of the past.

The representative of the debit and credit card industry in Britain is the UK Cards Association, and they have said that the European Commissions plans will hurt the British consumer while at the same time yielding no, or very little, corresponding benefit.

Richard Koch is a senior executive at the association, and he says that the British public are used to, and are very fond of, free banking. He added that the new model being put together by the commission would greatly impact the ability of the card issuer’s to continue with that.

In 2012, the EC released a Green Paper which suggested their possible regulation of the current system, which it believes will make for a more competitive market. The paper also said that under the current system the cost of paying with a debit or credit card was unknown by the public and very often opaque to merchants too.

It’s response to this is to cap, or scrap, the cost to retailers when a customer pays with a card. Known as interchange fees, they vary throughout the EU and are set by Visa and Mastercard, who between them run all the transaction networks. In the UK, it costs a shop owner an average of 9p whenever someone pays with their debit card, and the fees for accepting a credit card are higher, currently 0.7% of the total purchase.





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