Friday Sep 20, 2024
Friday Sep 20, 2024
Friday, 20 August 2021 04:19 - - {{hitsCtrl.values.hits}}
The Central Bank (CB) said yesterday that it will inquire into commercial banks’ move to hike credit and debit card charges on overseas transactions.
Several banks have notified that to reflect current exchange rate movements, the amount added to the rate of exchange adopted by the payment scheme (Visa/MasterCard) at the time of billing will be increased from 2.5% to 7% on overseas transactions on credit/debit cards from mid next week.
This change, banks said, was in order to ensure that banks price foreign currency transactions in line with the cost banks source them as the rates used by payment schemes are materially below the market rates.
Additionally, a processing fee of 5% will be levied on transactions to overseas merchants who may be located overseas or online billed in rupees including Dynamic Currency Conversion (DCC) transactions.
When journalists inquired about this at the monetary policy media briefing, Central Bank officials said this will be looked into.
It was stated that the Central Bank had not initiated this increase in charges nor any guidance given for the same. The Central Bank had only capped the interest rate that could be charged by credit card companies at 18%.
DCC is a service offered at selected POS located overseas and used by certain merchants and service providers (who may be located overseas or online). DCC converts a foreign currency transaction into the currency of a credit card account at the point of sale. The currency of the card account is rupees.
The merchant will convert the transaction amount into the currency of the card account, using a foreign exchange rate determined by the relevant merchant or DCC service provider. This rate may differ from the foreign exchange rate determined by Visa, MasterCard or other relevant card scheme associations.
E-commerce specialist Kapruka Founder and Chairman Dulith Herath said the move means direct ordering from eBay, AliExpress and Amazon will have a 7% hit. Also, Uber will be affected as its payment may most likely be DCC.
Analysts said that many Sri Lankans use Uber heavily for taxi and food delivery services and most have their credit cards registered for automatically charging to the card rather than cash on delivery, which is inconvenient, though Lankan consumers buy from a local store and on a rupee, tariff order is placed through Uber.
“Banks recover a stamp duty of 2.5% on top of the total amount (i.e., Rs. 25 for every Rs. 1,000 spent) at the end of the month for all Uber transactions, which can come to a big amount if one is a regular user of Uber,” they opined.
Others said these questionable practices will improve the attractiveness of local solution providers though those who use overseas merchants or billed by online from overseas stand to lose.
