The British Retail Consortium
has released its annual Cost of Collection survey, and is
bringing the fight to the payments industry. In the card vs cash
war, Louise Naughton reports on the latest battle between merchants
and payment processors.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Retailers are
again blasting banks for levying “unjustifiably-high and illogical
charges” for card processing.
According to the British Retail
Consortium’s (BRC) annual Cost of Collection Survey, total UK
retail spending in 2010 stood at £292bn ($471bn) with the cost of
payment collection across all payment methods amounting to over
£659m.
Such fees are “out of line” with
the costs retailers incur for payment transactions, argues the BRC.
While cash accounts for the majority of transactions (55.2%), only
11.5% of the total payment collection cost is attributed to it.
This is compared to the cost of accepting debit and credit cards,
which account for a lower proportion of payments, 34% and 9.95
respectively, but cost retailers some 37.5% and 44.5% of their
total payment collection cost.
But the payments industry is not
taking these figures lying down. The report’s methodology is called
into question by the UK Cards Association, which says all is not as
it seems.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“It is very difficult to tell from
the report what the cost of cash is to the retailers themselves as
opposed to the money they pay,” says spokesperson Sandra Quinn.
“The BRC does not seem to be
particularly forensic around the specifics of how much cash costs
retailers.”
Richard Braham, policy advisor at
the BRC stands by the survey, calling Quinn’s criticisms “strange
and unhelpful”.
“Our survey comes straight from the
tills of retailers so it is very robust and comprehensive,” he
says. “To criticise without being specific is not particularly
helpful.
“Neither Visa nor MasterCard have
told us they think the methodology is wrong this year, as they have
done every other year.”
MSC
transparency
The bulk of a
retailers’ payment collection cost (86.21%) is attributed to the
merchant service charge (MSC), which includes the processing fee,
interchange and the card scheme fee for that individual
transaction.
Braham says there is no
transparency or accountability in the MSC and the BRC continues to
push for the card associations to share the full composition of
those fees.
While Quinn acknowledges there
isn’t any industry-wide work currently being done to increase MSC
transparency, she told CI she would be “very surprised” if
the contracts that exist between merchants and their cards
businesses are not specific about what services are covered within
the fees.
Overall debit transactions are up
15.8% from 2009 and cash came down 5.2%. But despite this decrease
in usage, the BRC notes the cash average transaction value rose
from £11.43 to £12.93 – a trend retailers believe is indicative of
an economy still feeling the effects of a recession.
Not content with being the payment
method of choice, cash is also seen to be a significantly quicker
than cards, with the BRC finding the average time taken to process
a cash transaction at the point-of-sale is 27.2 seconds compared to
39.4 seconds for a card payment.
The cheque continued its free-fall
into payments oblivion, accounting for a meagre 0.1% of total
transactions in 2010, down a staggering 55% from 2009. This may not
reflect a consumer’s natural spending behaviour or payment
preference, however, as the retailers themselves stand accused of
forcing the decline of cheques thanks to their ongoing refusal to
accept them.
“In the face of big pressures on
household budgets, people are managing their money carefully while
retailers are minimising the costs they can influence by investing
in anti-fraud technology,” says the BRC’s director general Stephen
Robertson.
“But unjustifiably-high payment
charges are still being taken from retailers. The question is
should this money be going into increasing banks’ profits or to
keeping shop prices down for customers? Reducing the charges bank
impose so they genuinely reflect the actual costs involved in
processing these transactions is the right answer.”
On a happier note, the payments
industry and retailers have shown they can successfully work
together as fraud losses fell by 37% during 2010 thanks to
technological innovations such as the latest secure card readers
and new levels of internet security.
While it is unlikely both parties will ever agree on the subject
of payment costs, increased MSC transparency will allow for a
greater understanding of what services merchants are paying for.
Failure to do so only serves to instil the notion there is
something to hide.
