PayPal is raising merchant fees between UK and Europe

(Image credit: PayPal)

PayPal plans to roll out new fees for payments between businesses located in the UK and those in Europe.

Currently, the majority of businesses pay around 0.5% for payments from the European Economic Area, but British business owners will be charged a new 1.29% fee from November.

Up to this point the charges have remained unchanged prior to the UK parting company with the EU customs union and single market. However, PayPal is justifying the fee increase due to rising costs in interchange fees between the UK and EEA.

European legislation that caps credit and debit card interchange fees are no longer valid since the UK is no longer a member of the EU. That means the caps of 0.2% for the former and 0.3% to the latter no longer apply to UK businesses.

Interchange fees

Compounding UK business woes has been the recent news that Visa and Mastercard will be raising interchange fees fivefold, with the increase planned for mid-October onwards. UK consumers could, ultimately, be hit by the fee increases with the costs being passed on to them via products purchased from the EU.

While the fee increases are still lower than PayPal’s standard 1.99% levy for rest of the world transactions, business owners in the UK, Guernsey, Jersey, Gibraltar and the Isle of Man could find the latest Brexit-related issue damaging. However, PayPal has said that the move will help to simplify cross-border fee arrangements, especially when compared to other e-commerce payment providers.

The Federation of Small Businesses (FSB) has met the news with disdain, stating that the announcement "is unwelcome news for small businesses and entrepreneurs". Adding to tougher trading conditions has been the drop in value of exports from UK businesses, with 40% of small exporters reporting a fall in value of their products.

Rob Clymo

Rob Clymo has been a tech journalist for more years than he can actually remember, having started out in the wacky world of print magazines before discovering the power of the internet. Since he's been all-digital he has run the Innovation channel during a few years at Microsoft as well as turning out regular news, reviews, features and other content for the likes of TechRadar, TechRadar Pro, Tom's Guide, Fit&Well, Gizmodo, Shortlist, Automotive Interiors World, Automotive Testing Technology International, Future of Transportation and Electric & Hybrid Vehicle Technology International. In the rare moments he's not working he's usually out and about on one of numerous e-bikes in his collection.