A seemingly irreversible trend away from the
use of cash by UK consumers was dealt a blow in 2007, reveals a
study by industry body the British Retail Consortium (BRC).
use of cash by UK consumers was dealt a blow in 2007, reveals a
study by industry body the British Retail Consortium (BRC).
“Reports of the death of cash are premature,”
said the BRC’s director general, Stephen Robertson. “Cash is not
only alive, it’s thriving.”
said the BRC’s director general, Stephen Robertson. “Cash is not
only alive, it’s thriving.”
His comments are well founded. According to the
BRC, despite what it termed “card companies pushing plastic
alternatives” cash was used for 60 percent of all transactions in
2007, up from 54 percent in 2006. Measured by value, cash was used
for 34 percent of retail spending in 2007 compared with 32 percent
in 2006.
BRC, despite what it termed “card companies pushing plastic
alternatives” cash was used for 60 percent of all transactions in
2007, up from 54 percent in 2006. Measured by value, cash was used
for 34 percent of retail spending in 2007 compared with 32 percent
in 2006.
“Hard-up customers are increasingly reluctant
to spend money they have not actually got in their hands,”
commented Robertson. “While total retail spending continues to
grow, there is a widening gap between the amount spent in cash and
the amount spent using cards, suggesting customers want to keep
tight control of their finances,” he added.
to spend money they have not actually got in their hands,”
commented Robertson. “While total retail spending continues to
grow, there is a widening gap between the amount spent in cash and
the amount spent using cards, suggesting customers want to keep
tight control of their finances,” he added.
Unjustifiable charges
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From the retailers’ perspective the BRC emphasised that its Cost of
Collection survey showed cash to be the most cost-effective way for
retailers to accept payments and highlighted the extra costs card
companies impose on retailers for processing card
transactions.
The BRC’s conclusion was based on a survey of
17,000 shops, large and small, multiples and independents, with
total sales of £131 billion ($260 billion) in 2007. This was about
half of total UK retail sales.
17,000 shops, large and small, multiples and independents, with
total sales of £131 billion ($260 billion) in 2007. This was about
half of total UK retail sales.
On average, the BRC found that a retailer is
charged two pence for processing a cash transaction while the
charge for a credit card is 34 pence and for a debit card eight
pence. Respondents to the BRC’s survey were charged £516 million in
2007, of which £424 million (82 percent) related to card
payments.
charged two pence for processing a cash transaction while the
charge for a credit card is 34 pence and for a debit card eight
pence. Respondents to the BRC’s survey were charged £516 million in
2007, of which £424 million (82 percent) related to card
payments.
“The BRC has consistently said these
unjustifiable charges cost customers – because they are so high,
retailers are forced to pass them on,” stressed Robertson. “As
banks move to replace cash, they must acknowledge the very low
costs they actually incur.”
unjustifiable charges cost customers – because they are so high,
retailers are forced to pass them on,” stressed Robertson. “As
banks move to replace cash, they must acknowledge the very low
costs they actually incur.”
The BRC has also voiced strong opposition to
the manner in which contactless payment is being introduced,
accusing card companies of pushing the new payment method as a way
of further boosting their own revenue.
the manner in which contactless payment is being introduced,
accusing card companies of pushing the new payment method as a way
of further boosting their own revenue.
“Banks should not be exploiting new payment
systems as a way of taking extra money from shoppers,” said
Robertson. “There should be a lower fixed fee per transaction,
which actually reflects the [very low] cost of processing, so new
technology brings balanced benefits to retailers, consumers and
banks.”
systems as a way of taking extra money from shoppers,” said
Robertson. “There should be a lower fixed fee per transaction,
which actually reflects the [very low] cost of processing, so new
technology brings balanced benefits to retailers, consumers and
banks.”
On numerous occasions the BRC has stressed that
for retailers to accept cash replacements such as contactless
cards, charges must be below those for handling cash.
for retailers to accept cash replacements such as contactless
cards, charges must be below those for handling cash.
HSBC under fire
The BRC has also been at the forefront in condemning ad valorem
(percentage) charging for credit card fees based on the argument
that it costs no more to process a high value transaction than a
small one.
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By GlobalDataThe BRC also objects to the
Honour-All-Cards-Rule, which compels retailers to accept all cards
branded with the card scheme logo, and has pointed out that in this
regard depending on the type of card and where it is used, there
are big differences in the fees retailers pay.
Honour-All-Cards-Rule, which compels retailers to accept all cards
branded with the card scheme logo, and has pointed out that in this
regard depending on the type of card and where it is used, there
are big differences in the fees retailers pay.
The BRC has expressed grave concern that the
Honour-All-Cards-Rule is, as it terms it, “open to abuse” when
retailers can do nothing as banks move customers to types of cards
with higher charges.
Honour-All-Cards-Rule is, as it terms it, “open to abuse” when
retailers can do nothing as banks move customers to types of cards
with higher charges.
In an example of this the BRC has strongly
condemned UK bank HSBC’s plan, announced in April this year, to
issue 10 million UK customers with Visa debit cards, replacing the
current MasterCard Maestro debit card.
condemned UK bank HSBC’s plan, announced in April this year, to
issue 10 million UK customers with Visa debit cards, replacing the
current MasterCard Maestro debit card.
The BRC noted that the reason given by HSBC for
the change is that it will assist customers who make international
transactions. The BRC’s view is that HSBC’s decision is “a
self-serving move to rake in millions more in charges.”
the change is that it will assist customers who make international
transactions. The BRC’s view is that HSBC’s decision is “a
self-serving move to rake in millions more in charges.”
According to the BRC the card fee for a Maestro
transaction is 5.97 pence and 8 pence for Visa debit
transaction.
transaction is 5.97 pence and 8 pence for Visa debit
transaction.
“With HSBC accounting for 40 percent of the
market in personal debit card transactions, retailers will be
paying out millions more while getting precisely no extra service
in return,” said Robertson.
market in personal debit card transactions, retailers will be
paying out millions more while getting precisely no extra service
in return,” said Robertson.
With rulings and enquiries turning the tide
against some of the card companies’ unjustifiable fees, it’s clear
they are exploiting other ways of recouping lost revenues.”
against some of the card companies’ unjustifiable fees, it’s clear
they are exploiting other ways of recouping lost revenues.”
The BRC estimates that HSBC’s card change will
increase retailers’ interchange costs by £25 million a year.
increase retailers’ interchange costs by £25 million a year.
