International payment systems Visa and MasterCard plan to increase the interchange rate* to 0.9% starting July 1, 2023. Accordingly, the acquiring fee paid by businesses for each non-cash transaction to banks and payment systems will increase. This will entail hundreds of millions of hryvnias of additional costs for Ukrainian businesses per year. Ukrainian retailers are asking the Office of the President of Ukraine, the Cabinet of Ministers of Ukraine, and the National Bank of Ukraine to intervene.
The main and undesirable consequence of these changes will be higher prices for Ukrainians. Ukrainian business believes that the current level of the interchange rate of 0.7% is economically justified and a compromise for all parties. This allows retailers not to increase their costs and restrain price growth, while banks and payment systems earn money from acquiring services.
Currently, the cost of acquiring and interchange rates in Ukraine is higher even than in Europe. The payment services market is dominated by two payment systems, so Ukrainian entrepreneurs have little alternative but to look for other companies to provide these services.
Currently, Ukrainian businesses are exhausted and do not have the funds to include the increased cost of interchange in their expenses. The Ukrainian Retailers Association once again appeals to the authorities, international payment systems MasterCard and VISA, as well as Ukrainian banks not to raise interchange rates until the end of martial law.
In addition, Ukrainian retailers are asking not to apply the terms of the Memorandum between payment systems and the National Bank, which was signed in July 2021, until the end of martial law. This document provided for a schedule of changes in the interchange rate until July 2023. The memorandum, which international payment systems are now appealing to, was signed in peacetime and did not take into account the circumstances in which Ukrainians and businesses are now in the second year of a full-scale war.
In a time of war, this position of global business, which has a market share of about 99.4% in Ukraine (45.5% of Visa Inc. and 53.9% of MasterCard Inc. respectively), is unclear. At the same time, these companies suffered almost no damage during the war, as they are global players, in particular: the net profit of Visa Inc. for 2022 is $14.96 billion, and the net profit of MasterCard Inc. – $9.93 billion.
*Interchange is an interbank fee that the bank servicing the company transfers to the bank whose card was used to pay for the goods or services.
