The UK government should intervene to cut the excessive charges banks levy on retailers for accepting plastic, says the British Retail Consortium.
The BRC’s annual Cost of Collection Survey shows accepting a payment by debit card costs a retailer four times more than when a customer uses cash.
According to the BRC, banks’ charges have almost doubled in five years. An average cash transaction now costs retailers 2.1p, a debit card payment costs 8.5p, but they are charged 34p when a customer uses a credit card.
Retailers are concerned that banks plan to make the higher debit card charging regime the norm for contactless and mobile phone payment methods.
They’re also unhappy that banks are creating new card products with much higher charges for retailers and moving customers across to them.
HSBC, among others, is planning to introduce new ‘premium’ or ‘World cards’ that attract additional interchange fees of between 0.7 and 0.9 per cent on top of the average 0.75 per cent of the transaction value that retailers previously paid.
“There is no justification for such big differences in charges between cards and cash,” says Stephen Robertson, the BRC’s director general.
“With payment technology and efficiency developing, card charges should be going down not up.
“Contactless systems can bring benefits, but banks are currently levying charges on card payments well beyond what it actually costs them to process these transactions.
“They can’t expect to maintain those excessive charges as numbers of non-cash payments grow.
“In the end it’s customers who meet these unfair costs in the prices they pay. Banks must reduce their charges to reflect more honestly the costs they actually incur in processing transactions.”
The BRC survey reveals that cash was used for 58 per cent of all transactions, up from 56 per cent in 2008, but down on 61 per cent in 2007.
In terms of money spent, 32 per cent of all retail spending was done with cash in 2009, compared to 33 per cent in 2008 and 34 per cent in 2007.
Says Robertson: “Cash is still the most popular way of paying and the cheapest for retailers.
“Cash use had a boost in the recession. Many people find managing their spending easier with cash – you can’t spend what you haven’t got. But the longer term trend suggests cash use will slip gradually.”
