Debit should be the “norm” in Europe

[Dave Birch] At the Intellect / Payments Council conference on Driving Change in Payments, sponsored by Consult Hyperion, one of the delegates (I think it was one of the chaps from Accenture), raised the topic of surcharging, asking whether the surcharging of non-cash payments might slow the spread of e-payments in general and low-value contactless cash replacement payments in particular. He also mentioned the example of surcharging by low-cost airlines.

Perhaps the most obvious example of tender steering in Europe is in eCommerce – where Ryanair (and other low-cost carriers) surcharges considerably for all but a single method of payment (currently MasterCard Prepaid cards)

[From Will Retailers Use “Tender Steering” to Control Interchange Fees? |… | LinkedIn]

While the point about surcharging in relation to the spread of new payment mechanisms is interesting, what’s going on with the airlines isn’t really surcharging (Ryanair said specifically that “these are not surcharges”, and they are correct). What these charges are are a transaction tax that everyone has to pay (I’d be curious to find out how many people actually pay with Ryanair MasterCard prepaid cards). Unsurprisingly, a great many people were unhappy about this practice (ie, advertising an air fare as £10 then charging £18 because the customer pays with a credit/debit card) as it smacks of unfairness.

A super-complaint is to be launched about the “murky practice” of surcharges levied on customers who pay by debit or credit card

[From BBC News – Credit and debit card surcharges ‘are excessive’]

Bear in mind that if you are booking tickets for a family, these transaction fees can easily become significant: if they were folded into the price of the ticket, it would give a more accurate guide to the public.

I recently used Ryanair and cost me £30 in booking fees and another £48 in online checkin fees to use my printer and my paper and my Ink. Can anybody explain how that works ?

[From Which Launches Super-Complaint Into Credit And Debit Card Surcharges With Office Of Fair Trading | Business | Sky News]

Well, the solution to that seems pretty straightforward: don’t book Ryanair. It’s not just them, by the way. I understand that EasyJet charges £8 (EIGHT QUID) for a debit card transaction that costs it, what, 15p? Personally, I won’t use any of the “low cost” carriers, so I don’t know what the exact figures are. Anyway, today the OFT ruled on the super-complaint (and I can’t wait to Ryan Air’s response because they will undoubtedly go bonkers):

Travel companies have been ordered to end the use of hidden surcharges for passengers paying by card. Airline, ferry and rail passengers typically have to click through four to six pages of an online booking before the charge is added to the price. Now the Office of Fair Trading (OFT) has ordered them to make all debit or credit card charges clear immediately.

[From BBC News – Hidden card charges for travel tickets to be banned]

But that, to me, isn’t the interesting part of the ruling. This is:

It also wants the law changed to abolish altogether charges for using debit cards.

[From BBC News – Hidden card charges for travel tickets to be banned]

Much as I dislike government intervention in the pricing of anything, unless the costs of cash are to be distributed properly (which they won’t be) this is the only sensible course of action. Making debit cards the “zero” and allowing retailers to surcharge other payment mechanisms (including cash) is fair, with one proviso: that pre-paid cards are counted as debit cards. This is necessary to deliver financial inclusion.

Perhaps the European Commission could be persuaded to adopt this as part of its SEPA initiative and make it common throughout Europe so that pre-paid and debit cards become the “normal” way to pay?