Government regulators in the United Kingdom should intervene to reduce how much it costs merchants to accept card payments, the British Retail Consortium contends.
The London-based organization, which represents national, large and independent retailers, says the average credit card transaction costs merchants 34 pence (50 U.S. cents or 41 euro cents), while debit card transactions costs them 8.5 pence on average and cash costs them 2.1 pence.
The organization based those findings on the results of its 2009 Retail Cost of Payment Collection survey, which the British Retail Consortium conducted earlier this year.
The survey covered more than 53% of total UK retail sales and represents about 21,500 retail outlets with combined transactions worth 151 billion British pounds, according to the group.
With card payments representing 76.7% of retail spending in 2009, if fees for all payment methods were the same as for cash, merchants would save more than 480 million pounds, the consortium noted in a recent news release.
The average cost to accept a debit card and cash from consumers at the point of sale and online has increased since 2008, from 8.1 pence and 2 pence respectively, while the cost to accept credit cards decreased from 35.5 pence, according to the consortium. The group, however, still believes the collection fees are too high, especially because debit card collection fees have almost doubled in the past five years.
Merchants worry banks plan to increase the debit card interchange rates applied to contactless and mobile payments, which would lead to higher merchandise prices, the group contends.
However, “some banks around the world are starting to break down fees into competitive costs, enabling a greater sense of transparency and allowing merchants to see exactly what they are paying for each part of the service, Paul Love, a business solutions consultant at Omaha, Neb.-based global payments provider ACI Worldwide Inc., said via e-mail.
Moreover, acquiring banks that can improve transparency regarding fees and charges for merchants “ensure that both parties are better placed to engage in reasonable negotiations to get what both sides feel is a fair deal on the overall merchant service charge,” Love said.
Debit cards are the most-popular payment method in the UK, accounting for 44% of UK retail sales, according to the survey results.
The survey results suggest cash has not lost its appeal, accounting for more than 58% of UK retail transactions. Moreover, 88% of all consumer retail transactions are now made using cash and debit cards, according to the survey results.
The annual cost to accept all payment types is 588 million pounds, with merchants paying 478 million pounds, or 81.2%, to their acquiring banks to cover issuer interchange, processing and other costs.
As part of that cost, merchants spend 278 million pounds, or 47% of the total, to accept credit cards, though that payment type represents only 11% of total transactions, according to survey results.
Not all payments organizations view the cost to accept cards as being too high or unfair, however.
The “consortium continues to ignore the true cost of handling cash,” the UK Cards Association, which represents the UK cards payment industry, noted in a statement. “If merchants accept a stolen card, their bank will cover them for the fraud loss. But if a cash payment goes astray, then the merchant takes a hit.”
Moreover, “retailers negotiate their fees with their card companies on a regular basis, so the cost of accepting cards is highly competitive and can go up or down,” the association noted. “In fact, the cost to merchants for accepting credit and debit cards is much cheaper now than at any other time in the past.”
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