WorldPay Visa Debit Increases

WorldPay has recently informed their customers of their latest merchant services price increases.  In a letter/email (click here) they advise customers that the “majority will see an increase in their costs of accepting Visa debit cards”.  WorldPay is the largest merchant services acquirer in the UK (market share of 40%-45%) and Visa debit is the most widely used card in the UK, so this is a wide reaching price increase affecting nearly every 2nd business in the UK .  You can expect your letter in December (Merry Christmas) if you havn’t already received it, even if you are a new customer or a customer of Handepay or Cardsave (who until now have been spared some of the price increases facing other WorldPay customers!).

But its not all bad news.  As this constitutes a material variation of your contract, WorldPay, Handepay and Cardsave customers have 60 days from the date of the letter/email in which they can terminate their contract and find a new merchant services supplier at no termination cost.

How much is the price increase ?

It depends.  The reason for the price increase is that Visa will change the way they charge WorldPay for “interchange” on their debit cards from a fixed rate per transaction to a percentage of transaction value (See our October post highlighting this forthcoming change).  This change takes effect as of 1 March 2015 increasing Visa’s charges from 8p per transaction (chip and pin) to 0.2% of transaction value + 1p per transaction (capped at 50p per transaction).  This means that WorldPay’s costs have increased for transactions greater than £35 and reduced for transactions lower than £35.  In determining your individual price increase, WorldPay will have taken account of your average transaction value and card mix so price changes will vary from customer to customer.

Are WorldPay “profiteering” from the increase ?

When input costs increase, suppliers are normally keen to stress they are only passing onto customers the cost increases they have suffered.  However, WorldPay’s letter notes that the increases will not only pass on their additional cost but will also “support their additional investment in products and services“.  Every customer will have their own unique pricing table so heres a simple formula to work out any profiteering element within your price increase :

New rate should equal : Old rate less 7p plus (transaction value multiplied by 0.2%)

If your new rate is higher then there is a WorldPay “profit element” included.  if the transaction value is greater than £245 then the new rate should be no more than 42p higher than your old rate (reflecting the 50p cap) otherwise there is a profit element. As we noted above, for any transaction below £35, WorldPay’s costs have decreased and in the interests of fairness these savings should also be passed onto customers, but we are unsure if they have been.  Heres an example of an actual merchant letter from Rugby Boats Limited and you can judge for yourself the extent of any profiteering.

Theres a double whammy for the 75,000 Cardsave customers who will also begin to be charged an annual fee of £29.99 for SaferPayments PCI compliance in November/December.  Cardsave had previously announced that existing customers would be unaffected by Cardsave’s new status as a division of WorldPay.  “Unaffected” clearly excludes being hit with additional charges!!

Won’t other acquirers also increase merchant services prices ?

Possibly, because this is an industry wide change to every acquirer’s cost base, but not necessarily. To date, WorldPay is the only acquirer to announce an increase and others may take a different view as to the extent to which increases are passed on or the timings of any increases.  Other acquirers are seizing initiatives to lower merchant costs :

  1. There will be an industry wide reduction in credit card costs during 2015 and some acquirers are currently considering not increasing their Visa debit charges in lieu of these forthcoming decreases.
  2. Some acquirers are currently offering customers access to the “Visa Cross Border Domestic Interchange Program” from 1 January 2015.  This enables customers to receive a 0.47% discount on Visa credit card rates and earlier access to the lower Visa debit card rates for transactions lower than £35 (0.2% + 1p). WorldPay’s letter makes no mention of this cost saving opportunity currently being promoted by other acquirers.
  3. Some acquirers are following an emerging trend in the UK market for interchange plus pricing for mid-market merchants and large SME’s (usually only offered to larger corporates) rather than blended pricing. Interchange plus pricing automatically adjusts for any changes in interchange, removing the opportunity for profiteering or time lags in the passing on of cost savings.  The trend is emerging because of the EU’s cap on interchange which will be implemented in 2015/16 in the UK and will lower overall interchange.  Not all acquirers can/will offer interchange plus to all large SME’s/mid-market merchants, so find one that does.

All of these diverging strategies demonstrate that it really will pay to shop around for merchant services.

How can Cardswitcher.co.uk help ?

Quite simply, we are the only resource in the UK where you can get instant, transparent, comparable quotes from a range of suppliers for your merchant services.  We will also offer a bespoke quotation service for larger merchants with more complex requirements.  Click here and spend 2 minutes to see if your current supplier is over-charging you or contact us.

We’d also love to hear from WorldPay customers who have received their price increase letters. We are curious as to exactly what, if any, additional profit WorldPay may be making off the back of these changes.

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  • Neil

    Our letter from Worldpay doesn’t mention the 50p cap per transaction but does say that the debit card percentage fee will be “taken on the total value of sales transactions” which to me seems to say they will be ingnoring the cap. A lot of our transactions are over £245 in value so this will mean a lot higher charges for us

  • http://www.cardswitcher.co.uk/ Cardswitcher.co.uk

    Neil – the 50p cap is a cap on WorldPay’s costs in respect of the interchange they pay. We have seen quite a few WorldPay letters and in none of them have WorldPay offered a cap to their customers, so yes they are ignoring it. Other acquirers are beginning to finalise their approach and the ones we have spoken with will be including a cap for customers. So do shop around in January.

    • James

      would this not depend on the pricing model you are with ? if you are with a blended, WP have the cap themselves when they are net settled to from the issuers and schemes, but if the merchant is on a blended there is no obligation to pass this cap on? additionally if the merchant is on an IC+ or ++ then this will be passed through and capped. I realise this post is quite old but just taking a read through.

      • http://www.cardswitcher.co.uk/ Cardswitcher.co.uk

        Yes James, that is correct. If you are on IC+ pricing then you are fine and contractually get the cap. But the issue is that almost no SMEs are on IC+ pricing and instead are on blended pricing. The cap is therefore not contractual and WorldPay would not pass it on, despite them getting the benefit of it. Very few of WorldPay’s customers will be on IC+ – only the larger retailers.

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  • Michael Saville

    No letter received but my charges have gone up from 15p per transaction to £1.82 each !!!! NOT AMUSED and definitley switching !!!!!

    • http://www.cardswitcher.co.uk/ Cardswitcher.co.uk

      Michael – that is quite an increase and you should be able to quite easily find cheaper rates and a supplier thats willing to cap rates for higher value transactions.

    • Julie Garner

      I didn’t receive letter or email either – interested to know how you got on

      • http://www.cardswitcher.co.uk/ Cardswitcher.co.uk

        Julie – we’ve heard from other merchants who say they also didn’t receive WorldPay’s variation notice, so you aren’t alone. Whether you can fight the timing of the additional charges on the basis you never received the notice is really a question of contract law and I confess this is not our area of expertise nor have we explored this on behalf of any merchants. What I would say is complain aggressively, take to social media to air your grievances and if all else fails look to switch. Chances are you can find better deals.

        • Julie Garner

          Problem is to switch now will incur penalties – I am taking legal advice – as I see it the 60 days should start from when I am made aware of changes.

          • http://www.cardswitcher.co.uk/ Cardswitcher.co.uk

            Do let us know how you get on. Am sure there are many other WorldPay merchants reading who will be very interested.

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