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Debit cards, cash and card charges

Sunday, 16 July 2017

The British Retail Consortium (BRC) has just released a report relating to breakdown of retail sales by payment method for 2016.

According to the report, card payments have overtaken cash for the first time ever, with more than half of all retail transactions being paid for by card instead of cash in 2016.

Overall, 54% of all retail payments – equating to £10.3 billion - was spent on debit, credit or charge cards in 2016. Of this, nearly 43% of retail transactions were paid for by debit card, showing a growth of 4.5%, while cash payments dropped by 5% to 42% of total retail spend.

The BRC attributes the growth of debit card use to the rise in use of contactless, particularly since the limit was increased to £30 per transaction at the end of 2015. A third of all card transactions are now contactless, according to The UK Cards Association.

One of the other findings of the BRC was that the cap on Interchange Fees introduced at the end of 2015 has helped achieve savings for Retailers, enabling investment to be made in POS technology for payment acceptance, particularly in respect of cards, contactless and other new payment applications both online and in store.

Additionally, the BRC said the cost of processing cards remained high for retailers, particularly for credit cards.

It is interesting to reflect therefore upon the impact of the recent announcement by the government about the banning of "rip off card charges" fees from January 2018.

Whilst as consumers we are all aware of the practice of surcharging, particularly in areas such as online airline ticket sales, nevertheless there is likely to be an impact upon prices, particularly for small businesses who may have smaller profit margins and financial resilience than their larger counterparts.

Additionally Visa has announced a 'war on cash' which, depending on how whether and how it is introduced in the UK and whether a similar stance is adopted by other payment schemes, may also result an impact upon retailer and consumer payment behaviour.

Whatever the impact of both these developments and others in the near future, and in spite of the recent assertion by the Chief Cashier of Bank of England that "Technology is not a threat to cash - it provides opportunities", cash as a payment method is certainly facing some strong challenges to its longevity.

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