High street retailers aren't having a very nice time at the moment, as consumers ditch cash and move generally towards payment with plastic. It is a lot easier after all, so why wouldn't they?
"80% of retail transactions are now made with a credit or debit card!"
And this means that the sheer quantity of payment fees has increased, as have the costs per transaction. This has brought the British Retail Consortium (BRC) to call on Parliament to intervene in what seems to be anti-competitive practices between the card providers.
Along with the weak pound, rising energy bills, global commodity prices, high transport costs, a tight labour market, and government-imposed costs are bringing some retailers to breaking point. Many are ready to close the doors and walk away, which would be a huge loss to the UK economy.
In October 2021, both Visa and Mastercard raised their fees on purchases made by UK consumers to European businesses from 0.2% to 1.15% for debit cards and 0.3% to 1.5% for credit cards. PayPal increased its own fees later in the year.
"These giant companies control 99% of all payments!"
The Payments System Regulator is now looking into an effective 600% increase in fees over the last eight years. There is a need for tighter regulation and the creation of a more competitive marketplace for payment companies.
One thing that is happening is that the maximum length of contracts for Point of Sale systems (and other payment systems) will be limited to 18 months, so there are no multi-year tie-ins for retailers. They'll also be notified of fees and encouraged to shop around when their contract nears an end.
"It would be possible for retailers to save thousands each year if it were easier for them to compare prices and switch providers!"
Something I found interesting was an account-to-account payment system that could bypass card payment companies completely. This has come into being since Open Banking was launched, and fintech companies are looking for ways to disrupt the world of finance using it.
Account-to-account is quite common in the Netherlands where restaurants often display a QR code. When scanned, the customer is asked to enter the amount and a gratuity, and the money goes directly from their account to the restaurant, without the need for a transaction to go via any card payment company. Yes, there are still some small fees involved because of the banks, but there are fewer moving parts so the costs are much reduced.
"More competition will shake up the market!"
Explore the open banking options available to you with card payments as soon as you can switch. Account-to-account isn't as mature in the UK as it could be and doesn't have the built-in protections that the likes of credit cards have. That will change though.
Whatever you choose to do, you could see a major saving in payment fees.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about saving money on your card payments, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
Don't forget to stay updated with our daily social media posts on Facebook.
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
No unauthorised use, duplication, distribution or modification to any original content contained within this blog is permitted without prior written permission of the author. All other trademarks and registered names are acknowledged.