Rising card fees causing big problems for businesses, industry group warns

Rising card payment charges and other banking costs are now a constant problem for many businesses, according to a leading enterprise group.

Increased “interchange fees” charged by Visa and Mastercard for handling transactions between businesses added huge sums to some organisations’ costs over the last year, it has emerged.

Neil McDonnell, chief executive of the Irish Small and Medium-sized Enterprise (ISME) association, said that interchange fees and other charges levied by banks and the financial services industry were becoming an ongoing problem for businesses.

“Interchange fees are something we’ve asked members about in our banking survey,” he said, adding that they were part of an overall problem with banking costs that all businesses face.

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While regulations cap fees on consumer card transactions, there is no such limit on payments between businesses, which Visa and Mastercard increased last year, adding to many firms’ costs.

“Our members are definitely paying €5,000 to €10,000 a-year, including all those charges, it’s a cost of doing business here,” said Mr McDonnell.

He added that his organisation had raised the issue with Government and the banks when discussing the overall cost of doing business in the Republic.

He argued that the problem dated back to the financial crisis, when banks increased charges to raise income from sources other than interest rates.

At the same time, smaller businesses, which account for the bulk of Irish enterprises, have no buyer power, leaving them with little choice but to accept whatever fees banks and intermediaries imposed on them, he explained.

“The worm has slightly turned now, because obviously higher interest rates are making the banks more profitable,” Mr McDonnell observed.

Card companies argue that interchange fees allow them to provide their services to businesses and consumers and in particular to continue to improve safety and security.

However, businesses say card companies increased their charges with no justification and simply take more money from clients in return for providing the same service as before.

“The cost of doing business has to remain affordable,” Mr McDonnell stressed. He added that if the banks did not ensure that this was the case, businesses would find some way of avoiding their charges.

He predicted that if the digital euro, a free-of-charge electronic payment system proposed by the European Central Bank, became a reality, ISME members would embrace it quickly.

“I know it is a long way off, but it would take a lot of costs out of the system and our members are always looking for ways of reducing these costs,” he pointed out.

A heating and plumbing supplies business told The Irish Times earlier this month that its annual interchange fees bill had rocketed to €400,000 from €171,000 over the last year.

The company deals mainly with other businesses, who often pay for goods and services with cards, leaving it vulnerable to any increase in these charges.

It also found that business-to-business charges are not regulated, while little real competition in the Irish market meant that it had no option but to accept the charges.

The Central Bank maintains that it supervises card companies to ensure that they are complying with regulations.

Michael McGrath, Minister for Finance, recently told the Dáil that business-to-business interchange fees were a commercial issue.

The Department of Finance did not comment when asked if Government planned to regulate business card payment charges.