Switch to Maestro could cost retail £40m a year

Retailers are bracing themselves for a hike in transaction charges following the migration of Switch to MasterCard Maestro.

A banking industry insider calculated that it could cost UK retailers up to£40 million a year.

Retailers are worried that the demise of Switch in less than 18 months will result in charges rising to match those of rival Visa Delta. Tesco director of treasury Nick Mourant was concerned that costs could double.

'Switch is around 16 per cent of sales for Tesco, so if it doubles it will be a big hit for us and everybody in the retail sector. Hundreds of thousands, if not millions, of pounds will be lost,' he said.

Roger Alexander chief executive of S2 Card Services, which will manage Maestro in the UK for MasterCard, countered that no changes were 'anticipated in the structure or level of merchant fees as a result of the move from Switch to Maestro'. However, retailers fear increases will occur over time.

Dixons director of risk assurance Andrew Owen said: 'We're concerned about the change. We have to be careful not to challenge what Alexander has said, but over time these things change. Uncertainty is being created and we must seek assurances.'

Retailers are also concerned about the possibility of a move from a pence-per-transaction charging structure to an ad valorem system.

Owen said this could have a 'massive impact', and calculated that the present Switch transaction charge for a£200 purchase on a pence-per-transaction basis would be between 6p and 12p, but would climb to as much as£2 with ad valorem.

Alexander's denial that such changes would be made provided little comfort for retailers ahead of the disappearance of Switch.