Small businesses will no longer be able to charge customers for using credit and debit cards due to new EU rules.
HMRC has announced that it will stop accepting payments by personal credit card as a result. It will continue to apply surcharges to payments made using corporate credit cards.
The legislation, known as the revised Payment Services Directive (PSD2), will also facilitate a new era of 鈥渙pen banking鈥� where individuals can allow approved third parties, including finance providers, accountants and price comparison sites, to access their current account transaction details.
Responding to the changes, Federation of Small 老九品茶es (FSB) National Chairman Mike Cherry, said: 鈥淭he EU legislation taking effect today represents a double-edge sword for small businesses.
鈥淭he proportion of small firms reporting a rise in operating costs is now at a five-year high. Removing their freedom to share the burden of card payment fees will give them yet another outgoing to worry about.
鈥淭oday鈥檚 changes make insisting on payment by cash all the more appealing. With access to cash restricted by a rapidly diminishing bank branch network and threats to ATM funding, small firms now find themselves between a rock and a hard place when it comes to customer payments.
鈥淭he interchange fees demanded by card companies are only the start of the costs that small firms incur when they process a card payment. They also have to foot the bill for compliance, set-up, authorisation fees and payment system operating costs. The EU does cap interchange fees, but these caps don鈥檛 apply across the board. Card providers with a small market share are free to charge considerably more than their bigger competitors.
鈥淚t鈥檚 hypocritical of HMRC to stop accepting personal credit card payments, as they consider them too expensive to process, while small firms are expected to absorb those same costs. Small businesses don鈥檛 want to pass on card fees to their customers, so it鈥檚 high time for policymakers and businesses to work together to bring down the charges levied by card providers.
鈥淭he potential for open banking to inject fresh competition into a whole swathe of sectors is huge. As things stand, too many small firms aren鈥檛 accessing the banking and finance routes that are right for them. Allowing providers direct access to the information they need to tailor offers and vet applicants could help change that.
鈥淲e need to see open banking facilitate the same kind of instant price comparison services that consumers enjoy. Small firms are far more like consumers than corporations. They need this support. We look forward to banks, regulators and third parties working collaboratively to ensure the potential benefits of open banking are realised from the get-go.
鈥淥pen banking promises to help transform accounting processes for small firms. For the VAT-registered small business submitting quarterly returns online, for example, being able to seamlessly transfer transaction details to accounting software could be a game-changer.
鈥淥f course businesses need to put security first. Small firms need to give careful consideration to the organisations they鈥檇 like to grant access to and ensure those third parties have the relevant approvals from the FCA.鈥�