On Saturday 13th January 2018, the EU Payment Services Directive 2 (PSD2) entered into force across the European Union, including a ban on ‘surcharging’ for card payments using all popular consumer debit and credit cards, both online and in shops. Irish Travel Trade News asked some travel agents and suppliers to comment.
Tour operators and other suppliers are, in general, absorbing the loss of debit/credit card surcharges on their B2C transactions across the board. The alternative of adding this cost to prices would also have to be across the board, with the risk of becoming uncompetitive. However, some tour operator members of the UK-based Association of Independent Tour Operators have adopted the AITO working group’s proposal that they apply an extra 0.5% commission to travel agents’ bookings to partially compensate for agents no longer applying surcharges to their B2C bookings by debit/credit card.
Travel Agents Respond
Dublin-based travel agent John Galligan, John Galligan Travel, told ITTN: “We regarded this as inevitable and were quite comfortable with the concept behind it, despite the financial implications. We took the view that we should be ahead of the curve and not drag it out to the bitter end. Accordingly, we dropped all additional charges for credit card sales last year. Our clients welcomed the move and this has consolidated our reputation with them, as an ‘honest John’. We welcome any suppliers who are increasing commissions to compensate for this, as the trade should be working together in the interests of the consumers.”
Another Dublin agent, Paul Hackett, Click&Go, said: “The implications for us are limited for now. We don’t sell anyone else’s holidays whereby we are paid a commission. We package everything for the consumer and sell direct to the consumer in a B2C environment. For credit card payments we never charged a surcharge for paying by credit card, so our customers have never paid a surcharge or a booking fee when buying a holiday from Click&Go.”
Lisburn-based Sandra Corkin, Oasis Travel, told ITTN: “We were able to negotiate lower rates with our service provider, which helped enormously with our fees. It is also our intention to reduce discounts and aim for enhanced commissions. Being members of Advantage has been helpful as they have managed to secure an additional 0.5% with some operators.”
A spokesperson for RCL Cruises Ltd said: “We are aware of the new legislation that came into effect in January of this year and we do not foresee any changes to our trade partner agreements as a result of the changes. This applies to all three of our brands (Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises). RCL Cruises Ltd will be compliant with the new legislation. We do not have any plans to alter our commission structures owing to this new legislation.”
PSD2 in Brief
The EU introduced the Payment Services Directive (PSD1) in 2007 to create a single market for payments within the EU. The revised PSD2, which came into effect on Saturday 13th January 2018, aims to create a level playing field for all Payment Services Providers (PSPs), including new payment-related FinTech companies.
PSD2 enables bank customers, consumers and businesses, to use new third-party providers to manage their finances, expands the scope of services offered by PSPs, and seeks to make electronic payment instruments and transactions more efficient, safer, cheaper and faster, both for the payers and the payees. The regulatory technical standards on the technicalities around PSPs’ access to bank accounts are expected to enter into force by September 2019.
PSD2 also bans merchants from passing on the costs of payments to their customers (surcharging), and puts in place stronger protections for customers when shopping online.
In line with the EU’s Regulation on Multilateral Interchange Fees (MIF), which entered into force in mid-2016, PSD2, in most cases, bans merchants from passing on the costs of accepting electronic payments to their customers.
This surcharge ban aims to protect consumers by prohibiting merchants from charging consumers additional fees for making payments by card, direct debit or credit transfer. For example, merchants, including travel websites, are no longer allowed to charge consumers additional fees for paying by debit or credit card.
The ban applies:
- to online B2C transactions (but not B2B transactions)
- to payments made by consumers using debit and credit card, direct debit and credit transfer using a fourth-party scheme (Mastercard, Visa, Giro or Bancontact)
- where the PSPs of both the consumer (i.e., the consumer’s bank) and the merchant are located in the EEA
For payment methods not covered by the surcharge ban, i.e. third-party schemes such as Diners Club or certain non-card payment methods, any charges applied by the merchant to the consumer cannot exceed the direct costs incurred by the merchant for accepting that payment method. For platforms or marketplaces, the surcharge ban does not impact on the platform or application fee charged to consumers, provided that these fees are not differentiated by payment method.
The PSD2’s ban on surcharge fees follows the MIF Regulation’s significant capping of interchange fees to 0.2% for consumer debit cards and 0.3% for consumer credit cards.