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An EU ban on card surcharges is set to cost the UK travel sector upwards of £150 million when it’s introduced in January 2018, according to tax specialists.

Card surcharges will be banned from 13 January, extending to transactions including booking holidays and flights when the second EU Payment Services Directive (PSD2) is introduced. The directive will ban Visa and Mastercard credit and debit card surcharges.

UK businesses are currently banned from card surcharges to improve profit margins, but card processing costs are still passed on to businesses under the current rules. The UK has also banned surcharges against American Express and PayPal transactions from January.

With the travel industry set to absorb those costs to the tune of £150 million, the earlier travel organisations identify and implement new payment systems to soften the blow of debit and credit card surcharges, the better.

Credit and debit card surcharges are set to be banned in UK and EU. Is your company able to absorb the cost of card processing? Take a look at our blog 'Is your business prepared for the end of card surcharges?' and prepare now to protect your profits in the future.

Debit and credit card surcharges will hit agents’ commission

Travel agents and franchisees already have slim margins to work from. Independent firms for instance typically take small amounts of commission on holidays sold. A number of other operators in the travel sector such as car rental firms and airlines will also be hit by the changes.

It’s understandable then that scores of travel operators are worried about the impact card surcharges will have on their business activities, with industry body ABTA calling for a review of interchange fee rates travel operators pay to credit card firms.

“I would support [a review into rates] as you can’t have it both ways. The credit card companies will likely benefit from the government policy [with more people expected to use credit cards now the costs have been removed]… now all of a sudden their costs are hugely challenging for us as an industry,” adds Gary Lewis, chief executive of The Travel Network Group.

Fighting back against card surcharges in the travel industry

With operators in the travel industry unable to pass on those costs and already working on thin margins, it’s likely the change could stall business growth for small agencies and operators looking to grow from January 2018.

It’s a move that’s being widely accepted by the public though, and a way for the Treasury to stamp its mark on what it calls “rip-off Britain”. Travel agencies and operators, no matter how much it hurts, will have to put a positive public face on the changes as part of their marketing efforts to attract new customers.

Behind the scenes, though, there are more practical changes that travel agencies and operators can make to soften the blow of surcharges before the ruling comes into force in 2018.

Optimising your current payment systems, introducing new, digital ways of accepting payments and making your business part of the fintech payment revolution is not only one of the best ways to navigate around changes in the law when it comes to surcharges, but to differentiate yourself from the competition and grow your travel business long into the future.

If you’d like to know more about what the changes in law around credit and debit card surcharges will have on your business and how to best prepare for the impact they may have, contact the Fibonatix team today.

Credit and debit card surcharges are set to be banned in UK and EU. Is your company able to absorb the cost of card processing? Take a look at our blog 'Is your business prepared for the end of card surcharges?' and prepare now to protect your profits in the future.

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