New payment laws are "double-edged sword" for SMEs
Businesses will no longer be able to charge customers for using credit and debit cards as new EU rules take effect.
The legislation - the revised Payment Services Directive (PSD2) - also means that individuals can now allow approved third parties, including finance providers, accountants and price comparison sites, to access their current account transaction details.
The Federation of Small Businesses (FSB) has described the changes as a "double-edged sword" for UK small businesses. Chairman Mike Cherry said: "The proportion of small firms reporting a rise in operating costs is now at a five-year high. Removing their freedom to share the burden of card payment fees will give them yet another outgoing to worry about.
"The interchange fees demanded by card companies are only the start of the costs that small firms incur when they process a card payment. They also have to foot the bill for compliance, set-up, authorisation fees and payment system operating costs. The EU does cap interchange fees, but these caps don't apply across the board."
The new rules could prompt more firms to ask customers to pay in cash, Cherry said. In fact, HMRC has already announced that it will stop accepting payments by personal credit card as a result of the new laws. It will continue to apply surcharges to payments made using corporate credit cards.
"It's hypocritical of HMRC to stop accepting personal credit card payments, as they consider them too expensive to process, while small firms are expected to absorb those same costs," said Cherry. "It's high time for policy-makers and businesses to work together to bring down the charges levied by card providers."
At the same time, however, Cherry said that the legislation will open up new ways for small businesses to manage their finances. "Open banking promises to help transform accounting processes for small firms. For the VAT-registered small business submitting quarterly returns online, for example, being able to seamlessly transfer transaction details to accounting software could be a game-changer."
SMEs need to put security first, he added. "Small firms need to give careful consideration to the organisations they'd like to grant access to and ensure those third parties have the relevant approvals from the FCA."
Nick Williams, head of business development at accounting software provider Intuit, has described PSD2 as "an incredible conduit for a fresh wave of fintech innovation".
He said: "More third parties will be able to create next-generation tools and services to help small businesses manage their finances, while providing a secure and reliable connection with their bank account. If you run your own business, PSD2 signals an exciting new era of choice and control over how you manage your finances and get invoices paid on time."
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