Aite Group have just compiled a report on the cost of point of sale transactions in the U.S., based on more than 40 interviews from March to May 2014 with merchant business owners and senior leaders. Those interviewed represent more than 30 companies that are merchants or support merchant acceptance programs.

Aite’s main findings were that:

• card payment acceptance has distinct advantages over cash in that consumers tend to spend far more at the point of sale with a card, and cash payments slow down the checkout line process
• new technology allows merchants to make offers linked to cards, particularly with the evolution of digital and mobile wallets
• many merchants fail to monitor and include "shrinkage" in their cost factors for accepting cash. (Shrinkage includes inventory losses, cash losses from miscounts, employee skimming and robberies) with some of the quick-service restaurant and convenience store merchants interviewed reported overall shrinkage as high as 4% of sales from employees stealing food, goods or cash out of the drawers

Aite cost comparison model estimates

In establishing a financial model to compare costs, Aite took an average ticket price, or what a consumer spends during one visit at the POS, for each payment tender. It did not consider inventory theft as a part of cash-handling expense. Cash expenses included handling and labor, or reconciliation when cash it out of balance, as well as armoured car services for larger retailers to deliver cash deposits to a bank. Payment card expenses include processing and interchange. Using their financial model Aite estimate that for the in-store average ticket size at specialty store retailers it costs the merchant about:

• 74 cents for a cash-payment of $39.26
• 52 cents for a debit card payment of $89.75
• $3.19 for a credit card payment of $128.63

Aite also found that these numbers vary for quick-service restaurants or convenience stores. Overall, Aite concluded that cash acceptance is the most expensive, and that accepting debit card payments is the least expensive.

UK British Retail Consortium cost survey shows cash is by far the cheapest 

The British Retail Consortium's (BRC) Payments Survey 2013 published in June 2014, see, covered 60 per cent or £191 billion in retail sales in 2013. It showed that customers in the UK are using less cash than ever as retailers make it easier and more convenient to shop and pay by other methods.

• BRC’s overall conclusion, as last year, it that the cost for a retailer to process a debit and credit card payment is still excessively high and out of line with the costs that retailers incur for cash transactions. The BRC cost comparison analysis for the main payment methods, shows that:
• Cash accounts for 52.57% of transactions - yet only account for 8.7% of costs (1.29p/transaction)
• Debit cards account 32.37% of transactions - and account for 36.63% of costs (8.83p/transaction)
• Credit and Charge cards account for only 9.28% of transactions - but account for a staggering 48.66% of costs (40.93/transaction).

N.B. The BRC study does take into account shrinkage

BRC study found that the average cost to handle a transaction based as a % of total sales turnover for the payment methods are:

Source & Copyright©2014 - British Retail Consortium 

---

CTMfile take:  The Aite study with its minimal sample sounds like it has been sponsored by the payment card companies and the banks. The BRC survey has been carried out since 1999 using the same rigorous methodology, e.g. the costs include:

Source & Copyright©2014 - British Retail Consortium 

Although, estimating payment costs is difficult, it is clear to CTMfile which estimates are closer to reality.