You are here: Home | News | Prepay cards need health warning for retailers
Prepay cards need health warning for retailers
Question: When is a MasterCard not a MasterCard and a Visa card not a Visa card? Answer: When the card schemes want to take consumers and retailers to the cleaners.
They are currently doing this through the creation of a multitude of replacement cards (also known as prepay cards) which are not only costing consumers an arm and a leg to use but are also confusing retailers because they do not know whether to treat them as a credit or debit card.The reason for this confusion is because the card schemes want prepay cards to be accepted a
Unfortunately this is leading to issues and problems. For instance, it is obvious to a retailer that a customer using a credit card is over 18 years of age but if they are using a prepay card that is mimicking a credit card then the retailer really doesn't have a clue how old they are.
The objective of the banks in launching prepay cards onto the market is to get hold of consumers' cash despite the majority of the public still wanting to use it for many of their purchases. So why are the banks undertaking such a manoeuvre - to replace a very efficient product, cash, with a very cost-inefficient product, the card?
The reason is that cash purchases do not bring in any revenues for the banks so removing cash from circulation is a potentially massive money-spinner for the financial institutions. This is a subject that Payments Guru has raised before and I've been right to do so because the banks continue to launch ever-more prepay type cards onto an unsuspecting market.
One area they are being particularly active is with contactless cards. Pilots such as the Barclaycard/Oyster OnePulse card in London are now underway and have been signing up retailers such as Thresher and Coffee Republic. No doubt they have been sold the idea by virtue of it being 'free' for retailers but my experience suggests that there is no such thing as a free lunch where the banks are concerned.
I hope that all those retailers who've signed up to the Barclaycard scheme know what the future costs of accepting contactless cards will be and that they have agreed a post-pilot contract with the scheme that doesn't include any onerous charges. Unfortunately, I suspect this will not have been the case.
Payments Guru is a monthly-ish column that hopes to get to the heart (and also the guts) of the payments and banking issues that most affect retailers. Whatever the experts in the banking industry tell you, payments guru will seek to put you straight.
With a multitude of years spent in the payments industry working for a number of major financial institutions Payments Guru has in recent years been successfully advising retailers on how best to handle their banks and payments suppliers.
In order to stimulate debate Payments Guru would like to hear any thoughts you might have on his columns so please email him at news@theretailbulletin.com
Tagged as: payments guru | visa | mastercard
Should your colleagues be reading the Retail Bulletin? Let them know about us.