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The drive by UK banks to replace cash usage with cards has come under heavy attack from the British Retail Consortium (BRC). In a strongly worded statement, the trade association accuses card companies of exaggerating the extent to which cards have replaced cash.
A BRC survey of 10,000 stores, which together account for a third of UK retail sales, shows that cash is still the most popular payment method, accounting for 54 percent of all UK transactions by volume.
Out of every £100 (US$200) spent in UK stores, £32 is paid for with cash, according to the BRC.
“The card companies, in their publicity campaigns for their products, are giving the impression that cash is on the way out,” a BRC spokesperson tells ePaynews. “For example, they are trying to present contactless cards as the ‘new cash,’ because contactless transactions below £10 do not require a PIN.”
Cash actually costs retailers less than cards, the BRC points out. On average, a £20 cash transaction costs a retailer less than four UK pence, while a £20 credit card transaction costs at least 17 pence, it says.
“Banks have long abused their position by imposing much higher charges on retailers for processing card payments than cash,” says BRC director general Kevin Hawkins. “Clearly, the banks have spotted that replacing cash with cards would mean a further boost to their profits.”
Retailers are not opposed in principle to the growth of card usage, says Hawkins. However, he wants to see a lower fixed fee per card transaction, which actually reflects the costs of processing payments.
The BRC says it is asking the Office of Fair Trading (OFT) “to force the banks to reduce their (card processing) charges.” The OFT is the UK’s official consumer affairs regulator.
“The rates that retailers pay for the card services they get from their banks are a matter of competitive negotiation, and large banks and retailers are both similarly able to negotiate a deal to mutual satisfaction,” an APACS spokesperson tells ePaynews. “The fees retailers pay for card services cover a whole range of items, and not just the card processing element, and with credit cards, there is the specific element of funds guarantee on a credit card transaction.”
The APACS spokesperson says the UK payments association agrees with the BRC that cash still dominates the payments market overall. “But the vast majority of cash transactions are for under £5, whilst the average credit card transaction at a retailer is over £50 for credit and around £30 for debit,” she says.
“What is clearly happening is that customers are driving change and using cards. In fact, the largest change on the high street is the number of retailers declining to take cheques. Their argument for doing this is that customers prefer to use cards, and since the advent of chip-and-PIN, cards have become simpler to use and process.”
Related Links
www.brc.org.uk
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Cash still king for customers
