How the credit card surcharge ban will change your online business for the better

8th August 2017

Wouldn’t it be wonderful if the price advertised for a product online was the actual price you paid for it at the checkout? According to recent news headlines, that could soon become reality, as the government plans to implement a new law from January, which bans businesses from charging their customers credit card fees. For many savvy online shoppers, this could be music to their ears. After all, this means that they will no longer have to pay an additional charge of up to 2% on top of the total transaction cost, because they chose to use their credit card. Some of the biggest culprits for charging their customers substantial amounts of money to this method of payment are airlines, takeaway apps and ticket booking agencies, and even government agencies such as HM Revenue & Customs and the DVLA charge extra for credit card use, but from 13th January that’s all set to change. The new laws set to come into force ban merchants from enforcing surcharges for use of credit cards, American Express and even services such as Paypal and Apple Pay.

But it isn’t the first move the government has tried in a bid to improve transparency for consumers. In April, retailers were stopped from charging their customers ‘excessive’ fees to encourage a fairer system for all. However, many people thought this move did not go far enough and now the Treasury has gone one step further, by abolishing them completely in favour of a more ‘transparent’ system.

But what does it mean for businesses trading online? Well, here at Pin Digital we think this major change could have a positive impact on ecommerce, encouraging more customers to choose online, rather than take a journey to the shops. After all, a more competitive price means less basket abandonment and better customer satisfaction.

But this change in the law hasn’t stopped banks from charging online businesses for credit card transactions. In fact, some experts have suggested that some products online may increase in price to cover the lack of transaction fees. Banks typically charge large retailers between 10p and 20p for each debit card transaction, or 0.6% for credit cards, so some retailers may have no choice to either absorb these costs or to increase prices. However, an overall surge in sales could have a huge influence on the profitability of a business and could over time compensate for the bank charges which businesses will still have to pay.

Stephen Barclay, the economic secretary to the Treasury, said: “Rip-off charges have no place in a modern Britain, and that’s why card charging in Britain is about to come to an end. This is about fairness and transparency.”

So, if Stephen Barclay’s prediction is right, perhaps online businesses may see a boost in sales from the ban on credit card surcharges. We will soon find out. But one thing is clear, the change in law will encourage consumers to buy and not only buy, but purchase online using a wide variety of payment platforms, which in the long term can only benefit ecommerce in the UK.