17 May 2004
Credit card companies are set to lose out on millions of pounds with cuts in the “interchange fees” charged to retailers.
Clampdowns on the fees, which are charged for the processing of card payments, could cost card companies £700 million.
The proposed clampdown comes after an investigation into fees charged by Mastercard, carried out by the Office of Fair Trading, which has concluded that the costs are too high.
Furthermore, the OFT has found that consumers should eventually pay the fees themselves.
However, parties interested in the OFT’s findings hold differing views on the course of action it will take. For example, Barclaycard believes the OFT wants to bring the interchange charge down from one to 0.7 per cent, while City analysts predict even bigger cuts.
Morgan Stanley analyst Robin Down told the Times newspaper that, with a curbing of interchange fees, companies could lose the ability to offer Air Miles and other incentives.
Mr Down added that, if such incentives disappear, “people may stop using their credit cards altogether, as many people just use their credit cards for the incentives”.