Credit card payment at terminal in shop


On the 13th of January some important changes were introduced to rules on credit cards and access to financial information, which could affect small businesses. Here are the things you need to know about if you’re a business owner.

It’s going to be illegal to charge customers for paying by credit or debit card

Any business that accepts card payments will fall under the remit of a change in the law, which will prevent adding a surcharge if a customer pays by debit or credit card. This includes both online and physical transactions as well as applying to public agencies.

Corporate, business and commercial debt cards are excluded by the new legislation.

Why is it happening?

It’s because of something called the European Payment Services Directive 2 (PSD2) comes into force, which includes a ban on surcharges for card transactions.

The Second Payment Services Directive (PSD2) is a piece of European legislation that requires payment service providers (PSPs) to make changes to existing operations. The new legislation follows on from the 2013 rules, which banned businesses from charging more than it cost them to process the payment.

As part of the new legislation it will be illegal for any business to charge extra for using a debit or credit card anywhere in the EU.

Can I still have a minimum spend for someone paying by card?

As businesses have to pay the bank when a customer uses a card, many make the decision to put in place a minimum spend, below which card payments will not be accepted. This will not be illegal under the new legislation and so businesses can still do this.

You won’t be able to pay your tax bill with a personal credit card

The UK’s tax agency, HMRC, has decided not to accept personal credit card payments as they now consider them too expensive to process.

What does HMRC’s decision mean for my business?

With HMRC now refusing to accept personal credit card payments, businesses will have to use one of the following methods of payment when paying their tax:

  • Direct Debit
  • Faster Payment
  • Bacs

The alternative is to use a corporate, business and commercial cards and debit cards which aren’t affected by the new legislation. Beware that you will be subjected to a surcharge if you choose to pay this way.

It’ll be easier to compare financial products… but your data will go to more people

In August 2016, the Competition and Markets Authority (CMA) issued a ruling ordering the nine biggest UK banks to allow licensed startups direct access to their data, right down to the level of current account transactions. This has led to the creation of Open Banking which enables personal customers and small businesses to share their data securely with other banks and with third parties. This will allow you to compare products and manage your accounts using regulated third parties to provide new and innovative payment services.

How does Open Banking work?

Open Banking will enable companies to give more accurate personal financial guidance, tailored to your particular circumstances and delivered securely and confidentially.

To be able to provide tailored advice for your business, companies need to know how you use your account. Currently, to get personal finance guidance, you have to give over all of your confidential banking information.

With Open Banking, approved companies will be able to see your transaction information and this can help them find the best account, or loan, that suits you and your business.

What third parties have signed up?

In order to be able to access Open Banking, companies must be regulated by the Financial Conduct Authority. This means that your data isn’t available to just anyone. You have to give consent before any third party can access your banking data. If you don’t want your provider to share your data with third parties, nothing will change from how it is at the moment.

All data passed between companies will be encrypted and protected.

The list of approved companies can be found on the FCA register.

SOURCE: The Federation of Small Businesses (FSB)