13th January 2018 will see the European Union make their updated version of the Payments Service Directive (PSD 2), be national law across all member states. The legislation is a set of common rules which covers electronic and non cash payments. The amendment in 2015 will affect passing credit and debit card charges from the payment providers to consumers.
Typically in the travel industry, charges set by payment providers are passed to the customers who make a payment by card. The changes will have a wide spread affect from commissions for travel agents and tour operators, to smaller businesses who can’t afford the absorb the charges per transaction.
A government consultation in early 2017, has investigated how the legislation as it stands would be implemented in the UK. During this period travel associations have been lobbying the government on behalf the industry. Here are some quotes from the leaders within the travel industry:
ABTA – Chief Executive Mark Tanzer
“The ban results from new EU legislation and as it is a pro-consumer measure there is no scope to overturn it. However, we have called on the Government to include an exemption for charge cards and commercial cards and are highlighting to the Treasury the negative impact a ban on card charges will have on the travel industry, particularly on travel agents. We will keep you updated as to any developments in this important area. “
ATOL – Legal Advisor Allen Bowen
“Travel would be the “most seriously affected” industry when the legislation becomes law. Those who use them [the charges] to prop-up their business are going to find the marketplace somewhat more challenging in January.”
Advantage Travel Partnership – Managing Director Julie Lo Blue
“We spent years educating customers about the benefits of debit and credit cards. [Now] we have to explore other options.”
AITO – Chairman Derek Moore
“Once the government’s implicit encouragement to the general public to pay for more of their purchases by credit card is in action, holiday costs will of course go up because tour operators work on such slim margins. This backward step is, Aito believes, to the definite disadvantage of the holiday-buying public and to consumers generally.”
What does my business need to think about?
A decision has not been reached on how the UK will adopt the PDS 2 legislation. It is certain that the charges pass on to customers on card payments will not be allowed from January 2018. If your business is in a member state in the EU you will need to check your countries adoption of the legislation. This change will inevitably see the cost of holiday rental rates rise. It will be illegal to offer a discount to encourage customers to pay by BACS or cash under the new law.
One option we see for holiday rentals is setting the rates for 2018 to include the transaction charge from payment providers. If you are a member of ABTA they will be releasing more guidance notes as it is publish.
We would love to hear about your thoughts on these changes send us a message or call us on +44 (0)1380 819474.
For more information on the PSD2:
UK Gov Consultation – Implementation of the revised EU PSDII
European Commission FAQ’s Payment Service Directive
New guidance on the 2018 changes to credit and debit card charges
The Second Payment Services Directive (PSD2)
EU Payment Services