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Minimising card system costs: don’t accept charging structures and fight for alternatives

The cost of the current payment systems is huge, e.g. in the USA the cost of payment card interchange fees is $100bn and in the UK the British Retail Consortium estimates that the costs to retailers the UK is £1bn/year. But what to do about it?

Fight the charges

In the UK, the British Retail Consortium plus merchants and other corporates have for many years complained about the cost of the payment card schemes. On their website, BRC write “The BRC long recognised the unfairly high and opaque fees associated with the acceptance of card payments and campaigned for legislation at both the UK and the EU level in order to address it by significantly reducing the level of interchange fees and allowing retailers to freely choose the cards they accept.”

After a long campaign, “The BRC was successful in ensuring that capping of interchange fees was included among the key recommendations of the Prime Minister’s EU Business Taskforce report on reducing red tape, published in 2013.” AND: “The BRC was instrumental in securing an Interchange Fee Regulation (IFR) for the EU which came into effect on 9 December 2015. The IFR created a cap on interchange fees of 0.2 per cent for debit cards and 0.3 per cent and introduced measures to give retailers more choice over the types of payment cards they accept.”

The BRC estimates that the IFR reduced costs for all retailers in the UK by up to £480 million annually. But banks are now adding new charges for file downloads, etc., etc.

It is vital to keep monitoring how much your payment system costs are and to understand why they are increasing.

Insist on alternatives

Another approach is to redirect transactions to other payment system options, e.g. local ACH options rather than just use Visa and MasterCard options. This can be done in two ways by either by the authorities or by corporate treasurers/merchants choosing to encourage other systems.

Authority intervention

The regulator, RBA, in Australia is considering intervening to stop banks from automatically directing contactless debit card payments through the Visa and Mastercard networks.

According to Reuters, the banks will need to stop automatically directing debit card payments through the two global networks, and instead, banks will need to give retailers the cheaper option to use local network EFTPOS. Philip Lowe, the governor of the Reserve Bank of Australia (RBA), told reporters: “Regulating here is not the preferred option but it is a fallback option if we don’t see the required change,” he said after a speech in Sydney.

Merchants choosing to direct traffic to cheaper systems

In the UK  NatWest’s Payit service which uses the faster payments scheme and offers “Payit payments credited in near real-time to your settlement account.”, as the figure below shows:

Source & Copyright©2020 – NatWest

By setting up their websites to encourage usage of Payit, merchants can reduce their payment card costs considerably, e.g. typically for a £100 transaction on a UK based website the charges are:

  • Payit: £0.35
  • European cards:
    • Stripe: £1.4+20p and merchant has to wait several days to receive money into their account
    • PayPal charges a standard rate of £2.90 plus a 30p.

Encouraging customers to use a particular payment system on your website has never been more important. To direct their customers to use particular payment systems (who have the world biggest e-commerce site) first focus on “converting browsing into buying” and then, and only then, they try and influence which payment system is used. They employ all sorts of techniques, e.g. what order to present payment choices, colour and size of type, etc. to encourage the use of particular payment systems. See interview with’s Daniel Marowitz, here, to learn more.

CTMfile take: Payment systems costs need to be managed, like all costs, using all means at your disposal including the authorities, choice of payment system and all the tricks in website design to influence which payment system your customers choose.


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