Comment - Corporate payment cards good for businesses bad for retailers
Most businesses will at some point have been approached by their bank or the card schemes with the suggestion they take out corporate payment cards for business usage by their employees. There’s no doubt about it - it’s a great idea to keep personal spending and business expenses entirely separate. By Scott Thomson
But there is a significant downside to such cards and it is not felt by the business endorsing them or their employees that are using them. It is felt by the retailers that have to accept the cards for payments.
Although such corporate cards look like any other credit or debit card they cost at least twice as much in fees to retailers. Consider this, a Visa personal credit card has an interchange fee (part of the total fee charged to retailers by the card schemes) of 0.5 per cent of the value of the transaction whereas a corporate Visa card will have an interchange fee of 1.3 per cent.
The differential is even greater when looking at business debit cards. A personal debit card will result in an interchange fee of 6p to the retailer accepting the card whereas the corporate equivalent will hit the merchant with an interchange fee of an astronomical 60p. Yes, we are talking 10 times the cost to merchants from accepting such cards.
The worst thing for retailers is that they are unable to differentiate between personal and corporate cards as they all cunningly look the same. It is a similar situation with pre-paid cards. They look just the same as standard payment cards but come with a nasty set of charges for retailers.
The reality is that even if retailers could tell the cards apart they would not be able to reject the corporate variety because in the Visa and MasterCard agreements with merchants there is the rule that they have to accept all cards that bear that scheme’s symbol.
This situation is extremely costly for many retailers, especially those that sell goods likely to be purchased on expenses. This includes all travel-related operators such as hotels, transport providers, and retailers located at airports and motorway service stations, etcetera.
For these operators the costs of accepting payments from corporate cards can be a crippling 10-15 per cent of sales. This is a simply horrendous situation and there is no way for individual retailers to lessen their exposure to the problem. The solution requires the matter to somehow be alerted to the relevant government departments and the Office of Fair Trading. No easy task.
But in the meantime more and more of these cards are being issued because the banking industry has undertaken big marketing campaigns to promote the cards to businesses and to sole traders. They have recognised that corporate cards as the latest weak area with which to take retailers to the cleaners and they are cleaning up in the process.
Scott Thomson, independent payments consultant
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