News & Views - Savantor

Interchange costs – a retailer’s view

Monday, 09 June 2014
The British Retail Consortium's 2013 Retail Payments Survey highlights what it sees as an ever-increasing threat to merchant operations caused by the rise in card usage in the UK and the associated costs of acceptance fees borne by the merchant. According to the report, 90% of merchant acceptance costs are due to interchange fees – estimated to total almost £1 billion last year. Cash, on the other hand, remained the most cost-effective method of accepting payments from customers. Debit card transactions (including contactless transactions that attract a much more attractive rate of interchange), are quoted as carrying a cost to the merchant of 8.83p compared to just 1.29p for cash. Obviously, the BRC's report is from a merchant's perspective and they are therefore calling for a domestic cap on card fees in the UK, pre-empting moves by the EU – something that has already been implemented in a number of other European countries. Setting the high-value ticket transactions aside (which the BRC admits is increasingly becoming the realm of the credit/charge card, carrying substantially higher transaction fees), 8.83p for debit transactions on a quoted ATV of £27.58 represents a fee of 0.32% and accounts for nearly 50% of all retail transaction value – business that drives the merchants' own margins. With the BRC's objection being driven by an increase in merchant operational costs, it doesn't seem likely that the consumer will see any benefit as those cost savings will not be passed on in terms of price to the customer. What the BRC appears to be calling for is that an already heavily-regulated financial services industry be subjected to more price regulation to facilitate an easier life for a competition-led retail industry.
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