Backing business with transparent transaction costs

In theory, British retailers ought to be celebrating. New European Union rules are being introduced to slash the cost of debit and credit card payments. The European Commission is claiming the measures will lead to savings of €6 billion a year across the EU.

Yet for many British retailers the plan is doing the opposite. Fees are rising. And for a lot of small and medium-sized enterprises (SMEs) the reasons aren’t clear why or what they can do about it.

Here’s what’s happened. Under the old system there was a variety of charges and fees across the EU. This hurt retailers and consumers. So the EU stepped in to cap fees for debit cards at 0.2 per cent of transaction value and 0.3 per cent for credit cards. The debit card cap recently came into force. The credit card cap will be implemented by October or November.

The caps are beneficial in most European countries. But in Britain, the effects are less helpful. The old fee was typically 8p per debit card transaction, no matter the size, paid by the retailer to the card issuer. Banks would add on a margin on top for handling the transaction, typically around 7p, leading to a total flat fee of 15p per sale.

Under the new rules, Visa now charges 0.2 per cent for debit card transactions and then banks are adding their own percentage margin, of anything up to 0.9 per cent. This may mean total fees are higher to retailers than before.

Worse, some banks are using the change to introduce additional fees, such as an “authorisation fee”, which can be as high as almost 4p per transaction. The net result is that many British retailers will suffer under the new system.

The problem has triggered a warning from the European consumer protection watchdog that urged the Commission to monitor banks to see if they increase account and service fees to compensate for lost revenue.

A key part of the problem is that many retailers are unaware of the reason their charges have changed. And have no idea how their banks are behaving. “Some smaller firms are in the dark,” says Kevin Hayler, managing director of independent payment provider Annecto UK. “The banks may have a statement posted on their website, but no context or explanation. They may not realise their bank is using the new rules to increase their margins.”

Not all payment providers are taking advantage. Annecto UK is clear that it will be introducing no extra costs as it implements the changes. Mr Hayler explains: “We will have to switch to the new fee structure mandated by the EU. It can’t be avoided. But our margins will not change. We will give customers the choice of fixing the margin at a pence-per-transaction rate or as a remaining percentage. Any reductions in fees will be passed on as a soon as possible, unlike a number of banks.

“And I can confirm there will be no new charges added. We are being totally clear about what we are doing. Our customers are being kept completely up to date and well informed.”

The reason? “Our ethos at Annecto UK is different. We champion independent small and medium sized firms. We think it is our job to find savings and to pass them on to the customers.”

It was this belief that motivated Mr Hayler to found Annecto UK in 2012. He had forged a career in the payments industry, including eight years at Barclaycard and three years running the SME portfolio for Bank of Scotland Merchant Services. “I saw the way the market worked and realised I could do so much better. The payments industry clearly needed a challenger,” he says.

Annecto UK offers clients up-front cash in return for repayment via an agreed deduction percentage of future transactions

Annecto UK would offer lower prices, newer technology and a more personal level of service. Everything, in short, to provide a superior package, helping SMEs process payments across all sales channels.

For in-store transactions, Annecto UK supplies retailers with the latest chip-and-PIN machines, connected to a super-fast network. For sales made over the phone, there is a Virtual Terminal, allowing payments to be made securely and with no integration, making it ideal for firms with tighter IT budgets. Annecto UK also offers a range of e-commerce solutions for the ever-growing online segment.

Smaller firms need advice on payment systems, so Annecto UK runs workshops for new and existing customers. These cover basic payment processes through to the best way to handle new payment technologies.


Funding is part of the equation, so Annecto UK offers clients up-front cash in return for repayment via an agreed deduction percentage of future transactions. It’s an established version of factoring, which unlocks 100 per cent of monthly turnover. The advance is usually repaid in seven to nine months. “There are no security and no up-front costs,” says Mr Hayler. “The key is that repayment varies according to transaction levels, so it really suits small firms.”

As a firm devoted to payments processing, Annecto UK is at the forefront of new technologies. It can help clients understand the opportunities brought by things such as tablet payments and digital wallets.

“This episode of EU fee capping really emphasises why we are different,” says Mr Hayler. “Banks just aren’t being clear with their clients about what is going on. By contrast we are being totally transparent. This legislation was introduced to cut costs to independent business and we are honouring that intention.

“The difference in behaviour comes down to attitude. We are on the side of independent businesses. We are sticking with that mantra.”

To find out how Annecto UK can help your business, contact 0800 1310049 or visit