Travel sector faces £150m black hole ahead of card charge rule changes

With just six months to go before a ban on debit and credit card surcharges comes into force, RSM is warning that the new rules could cost the travel sector up to £150m.

From 13 January next year, the second EU Payment Services Directive known as PSD2 takes effect. This will ban surcharging for credit and debit card payments for most transactions, including for flight and holiday bookings in-store and online.

Under the current rules, businesses are not allowed to profit from surcharging but the costs incurred can be passed on. When the new rules preventing this come in, there could be an impact to the bottom line.

The UK Cards Association’s latest card expenditure statistics for the year to April 2017 shows that consumer credit card spend with travel agents totalled £7.5bn. Based on charges of between 0.5 per cent and 2 per cent of transaction value, this indicates a cost implication in the range of between £35m and £150m across the sector.

As a result, travel operators face some difficult choices as to whether they choose to absorb the additional costs or pass them on to consumers in the form of increased headline prices or new booking fees. Travel agents may also wish to consider offering alternative payment method options.

Agents also need to be mindful of the transition date. The payment of balances after the 13 January 2018 for bookings made before this date will not be able to levy surcharges.

Ian Bell, RSM’s head of travel and tourism said:

‘This may seem like a fairly minor change, but travel agents who currently pass on their card costs to consumers may well feel a significant hit when the new rules start to bite next year. Many will no doubt consider raising headline prices in response, but nobody wants to be the first to jump. At a time when agents are already experiencing margin squeeze, firms need to consider their options now to ensure they don’t suffer a financial headache in the New Year.’