One of the UK’s larger ISOs, Paymentsense, has written to its merchants advising of significant fee increases following changes to Visa debit interchange costs.
Have you ever heard that old saying You might as well be hung for a sheep as a lamb? The folks at Paymentsense certainly have!
Paymentsense have doubled down on the increases and rolled out price hikes well in excess of the changes to interchange cost.
This will undoubtedly infuriate thousands of customers who feel this is a breach of Paymentsense’s promise to cap fees “for the duration of your contract”.
In this blog, I’ll take a look at Paymentsense’s fee increase letters and shine a little more light on their capped fee promise.
Summary of the Increases
|Visa debit chip and pin||0.2% of transaction value (no cap) + old rate|
|Visa debit telephone||0.2% of transaction value + 50p (no cap) + old rate|
|Non-qualifying credit cards||0.5% of transaction value + old rate|
|Account on file charge||£47.88 per year|
|Authorisation fees||3.85p per transaction|
Fee Increase Letter
Here’s an extract from a letter we have been sent by one of Paymentsense’s customers.
Below are some important points regarding the Visa debit card fee increases.
- Chip and pin: Rates are increasing by 0.2% whereas interchange costs have only increased by 0.2% less 7p. So, customers are paying an extra 7p per transaction in excess of interchange costs payable to Visa Europe. In the case of business debit, the extra is actually 10p.
- Telephone and non-secure eCommerce: Rates are increasing by 50p in excess of the chip and pin rates. Interchange costs have only increased by 7.5p. So, customers are paying an extra 49.5p (50p – 7.5p + 7p) in excess of interchange costs payable to Visa Europe (or 52.5p in the case of business debit). Paymentsense confirmed to us that this increase applies to all telephone transactions, even if CVV2 data is captured.
- Interchange cap: Interchange payable to Visa Europe is capped at 50p for chip and pin transactions and £1 for telephone and non-secure eCommerce transactions. Prices paid by Paymentsense’s customers are not capped.
Credit card increase
Non-qualifying transactions (telephone transactions without CVV2 and eComerce transactions not using 3-D Secure) now incur a charge of 0.5% above the qualifying rate.
There has been no increase in interchange costs for non-qualifying credit card transactions, so customers are paying an extra 0.5% above the interchange increases, which, interestingly, were nil.
Account on File Charge
A £3.99 per outlet per month fee is now paid annually in advance. So, that’s a new fee of £47.88 per year per outlet. If you have five shops, that’s an extra fee of £239.40 per year.
There is no new service or functionality attached to this fee or any detail about why the fee is being levied.
An authorisation fee of 3.85p per transaction has been introduced. Some, but not all, other providers also charge an authorisation charge.
Capped rate guarantee
Customers will probably be familiar with Paymentsense’s famous marketing message, which includes a “Price Guarantee” and claims that fees will be capped “for the duration of your contract.”
Contrary to what Paymentsense promised, customers may feel aggrieved that the recent increases are clearly higher than the interchange increases as demonstrated above.
They’ll also feel aggrieved that Paymentsense have introduced new charges being introduced. For example, authorisation charges and account on file charges.
Until recently, the Price Guarantee message was prominently displayed on PaymentSense’s website and it is still used by affiliates like PaymentSense Plymouth and by the company’s salespeople.
What Does Your Contract Say?
So, what does the Paymentsense merchant contract state with respect to their “Price Guarantee”?
Surprise, surprise! It says nothing!
So, potentially the guarantee isn’t even contractual. However, the Paymentsense website, which displays their Terms and Conditions, does include a reference to capped rates. It says:
Capped Rates applies only to personal credit and debit card rates for the duration of the contract; if acquirer personal card credit and debit rates increase during the contract period, then Paymentsense reserves the right to increase personal credit and debit card rates to cover those costs.
You’ll note the Terms and Conditions are very different to the marketing promise in that they only cover personal cards and exclude business/corporate cards.
Also, they don’t mention interchange at all and instead refer to the acquirer rates, which are the rates charged to Paymentsense by its acquirer, First Data.
We have demonstrated that the Payment Guarantee promise is clearly broken but are the Terms and Conditions? We think it is unlikely that the increases are reflective of the First Data increases without any additional margin from Paymentsense.
Any merchant not wishing to accept these fee increases should certainly challenge Paymentsense to demonstrate that neither the Price Guarantee nor their terms & conditions have been broken
Finally, if you are unhappy and wish to change to a different merchant service provider, I urge you to try out Cardswitcher. We compare hundreds of deals to find the best offer for your circumstances. The majority of SMEs who test our service end up saving money — so what are you waiting for?