Small Businesses Dismayed by Rising PayPal Fees
PayPal has announced new fees for payments between UK and EU businesses will be added from November in a move that could prove especially harmful to small businesses.
Businesses will soon be charged a 1.29 percent transaction fee for payments between Britain and the European Economic Area (EEA). This is a significant rise over the 0.5 percent most currently pay in charges that have been unchanged since before the UK left the EU customs union and single market. PayPal says the rise is justified by its own increased costs, such as a rise in interchange fees between the UK and EEA.
Rules capping credit and debit card transaction fees at 0.2 and 0.3 percent respectively throughout Europe no longer apply to the UK, resulting in similar moves by credit and debit card providers. In March, Mastercard announced a fivefold increase in fees for UK-EU transactions, with Visa soon following suit.
The UK Federation of Small Businesses notes these increased payment costs have contributed to 40 percent of small exporters reporting a drop in the value of their exports and is calling for stronger support from the Government. Since the start of 2021, one in four small exporters have stopped exporting to the EU, citing payment costs as a key reason.
British retailers and hospitality businesses have recently called for urgent action on transaction fees—which they argue should be removed entirely—and over in Canada, business associations are also urging their government to make commitments to lower card fees, saying they have become ‘a huge issue’ that costs small businesses and their customers millions of dollars annually.
Small and medium businesses typically bear the brunt of problems caused by transaction fees levied by cashless providers. Cash acts as a brake on these fees—providing a free-to-use payment option for individuals and businesses of any size—but areas in which cashless options are prevalent act as a warning of one major risk posed by a cashless society: unchecked fee rises.