The Government move to increase sharply the stamp duty levied on credit cards may leave consumers with less attractive credit card products than those in Britain, MasterCard Europe has warned.
Benefits such as increased product innovation, added-value services and competitive balance transfer offers are less likely to be available in the market because of the tax, according to a statement by MasterCard.
Mr Brian Moore, general manager of MasterCard Europe for UK and Ireland, says he is surprised by the Government's move to increase stamp duty on credit cards from €19 to €40 in the last Budget.
"I think it may discourage new entrants from coming into the market. Competition is always good for the consumer," Mr Moore says.
Stamp duty is usually deducted from cardholders' accounts in April and there are fears that consumers with more than one card will cancel accounts once the cost of the duty kicks in.
MasterCard has said it remains committed to the Irish card market and fully supports the position of the Irish Bankers' Federation (IBF). The banking industry body has condemned the stamp duty increases as "a tax on technology" and "a major disservice to consumers".
Despite its concerns, MasterCard indicates it expects the volume of credit card spending in Ireland to continue to grow.
"It's an ever-evolving business. It's growing at 10-15 per cent a year, easily," says Mr Moore.
Last year saw a slight slowing in the rate of growth in spending volumes in Ireland, with Mr Moore estimating growth at somewhere between 5 and 10 per cent. However, there was a 10 per cent increase in the number of MasterCard credit cards issued, he adds.
MasterCard says it is pushing the development of the debit market in Ireland and aims to increase the number of Maestro-branded debit cards issued and the number of outlets that accept the cards as a method of payment.
AIB began accepting Maestro cards in December 2002, while Bank of Ireland continues to distribute Maestro-branded Laser cards. Through the two banks, there will be more than 50,000 terminals accepting Maestro by June 2003.
Stamp duty on Laser cards and ATM cards is now €10 per card or €20 for cards with a combined Laser/ATM function.
"There may be fewer cards in the marketplace but people will continue to use them. Debit is a big opportunity to bring more people onto a method of plastic payment without exposing them to credit," says Mr Moore, noting Government concern about over-indebtedness among Irish consumers.
Apart from local issues such as the stamp duty increase, MasterCard is concerned with the negative impact of fraud on the global payments industry.
"Fraud used to be an opportunist crime, now it's much more of an organised crime," Mr Moore says.
The annual cost of fraud on credit cards issued in Ireland by the five clearing banks - AIB, Bank of Ireland, TSB, National Irish Bank and Ulster Bank - has stood at around €5 million in recent years.
Alongside its competitor credit card, Visa and the rest of the payment services industry, MasterCard is promoting the introduction of chip and PIN technology, which aims to prevent fraud.
In the UK, the new technology is on trial in Northhampton, where a pilot group is paying for goods with chip-carrying credit cards in certain shops and restaurants by keying in a PIN rather than signing a printed receipt.
The Irish banking industry is moving at a slower pace due to work involved in the euro changeover.
However, Mr Moore believes that because it is a small market here, driven by just two banks, it will be easier to implement the system quickly than in the UK, where there are more than 30 card providers in the market.
MasterCard is also working on improving security for online transactions in order to limit the number of disputed transactions.
At the moment, 84 per cent are charged back to cardholders who say they didn't make a particular transaction.
In the future, customers may be required to enter a password that will verify it is the right person using the card.
