PayPal Hikes Merchant Fees Between UK, European Businesses

PayPal is hiking merchant fees between businesses operating in the U.K. and those in the European Economic Area (EEA), the BBC and multiple news outlets reported. The new fees apply to all of the U.K., plus Guernsey, Jersey, Gibraltar and the Isle of Man.

Starting in November, the merchant fee will be 1.29%, up from its current 0.5% fee. However, the new fee doesn't reach the 1.99% fee that PayPal charges other countries.

Legislation in Europe limits interchange fees to 0.2 percent and 0.3 percent, however, those laws don’t apply anymore to businesses that operate in the U.K.

See also: Mastercard Planning Higher Fees For UK-EU Transactions

The fee hikes are part of the fallout following Brexit, when the U.K. withdrew from the European Union on Jan. 31, 2020, and as a result, is no longer part of the EEA. The U.K. is now considered a separate country in the terms of the EEA agreement.

The EEA includes all 27 countries from the European Union, plus Iceland, Liechtenstein and Norway. Before Brexit, the U.K. was part of the EU.

PayPal’s move follows Visa and Mastercard, both of whom already announced an increase in merchant fees starting mid-October. Visa is upping fees from 0.3% to 1.5%, while Mastercard is increasing the fee from 0.2% to 1.15%.

Read more: Visa To Raise Interchange On EU-UK Cross-Border Transactions

PayPal said the fee increase was necessary to cover its own additional expenses resulting from the hike in interchange fees between the U.K. and the EEA.

"Since the start of the year, around one in four small exporters have stopped exporting to the EU, citing, amongst other reasons, the costs involved in selling to EU-based customers," Martin McTague, vice chairman of the Federation of Small Businesses, told the BBC.

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The U.K. said last month that since it is no longer part of the EU, it is pursuing data-sharing partnerships with the U.S., Australia, Korea, Singapore, the Dubai International Finance Centre and Colombia, PYMNTS reported.