Government must stop banks overcharging shops and customers - BRC
As part of its promised clampdown on irresponsible banking behaviour, the new Government should intervene to cut the excessive charges banks levy on retailers for accepting plastic, the British Retail Consortium says.
The combination of unjustifiably high card charges and growth of non-cash payment methods promises big windfalls for banks and a financial blow for shops and customers.
New figures from the BRC, published today (Tuesday) show accepting a payment by debit card costs a retailer four times more than when a customer uses cash.
The BRC's annual Cost of Collection Survey includes results from over seven billion transactions in 21,500 shops of all types. It examines year-to-year changes in the methods of payment customers are using and the costs imposed on retailers by banks and card schemes for processing those payments.
Banks' charges for handling debit card payments were higher than a year ago. They have almost doubled in five years.
An average cash transaction costs retailers 2.1 pence; a debit card payment costs 8.5 pence, but they are charged a massive 34 pence when a customer uses a credit card.
Retailers are seriously concerned that banks plan to make the higher debit card charging regime the norm for the emerging contactless and mobile phone payment methods. If that happens, retailers would face huge increases in their costs as these new ways of paying replace cash – particularly for low value purchases. Inevitably, those extra costs would have to be passed on to customers through higher prices.
Retailers are also unhappy that banks are deliberately creating new card products - with much higher charges for retailers – and moving customers across to them. HSBC (among others) is to rollout new ‘premium' or ‘World cards'. They attract additional interchange fees of between 0.7 per cent and 0.9 per cent on top of the average 0.75 per cent of the transaction value that the retailer previously paid.
If charges for every payment method were as low as they are for cash, over 480 million in cost savings would be passed on to customers through lower shop prices.
British Retail Consortium Director General Stephen Robertson said: "There is no justification for such big differences in charges between cards and cash. 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 those 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 latest BRC survey shows cash holding its own as the favourite way of paying but in slight decline compared with recent years. Cash was used for 58 per cent of all transactions. That is up on 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. That was virtually unchanged from 33 per cent in 2008 and slightly less than 34 per cent in 2007.
British Retail Consortium Director General Stephen Robertson said: "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."
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