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Payment cards cost way too much and it’s getting worse (up 5%-16% in 2019)

The UK Government’s call for evidence on payments has united retailers in roundly condemning the excessive payment scheme costs. The British Retail Consortium, British Independent Retailers Association, Association of Convenience Stores, Federation of Small Business and UKHospitality have come together to call for decisive action to tackle increasing scheme fees. 

BRC’s 2020 Payments Survey*+ of the cost to retailers of accepting payments. It reached £1.1 billion in 2019, of which £950m was from card payments. Card payments account for 4 in every 5 pounds spent in retail, they also incur the largest charges with shops being charged an average of;

  • 18.4p per credit card transaction (up 15% from 2016)
  • 5.9p for every debit card transaction (up 6% from 2016). 

Not only this, businesses have received notices in the past year of new fees that will be charged to accept payments online.

2020 survey key results

The survey revealed important insights into payment system usage in UK retailers. Key results from the research included:

  • Cash remains the most cost-effective payment acceptance channel for retailers with an average transaction cost of just 1.4 pence per transaction
  • Debit cards remain around four times as expensive to process, measured in pence per average transaction 
  • Credit cards are more than three times as expensive to process as debit cards.
  • Cards accounted for almost 80% of retail spending prior to a Covid-19, and this has now increased significantly
  • Switching payment system suppliers is not easy. “Regulators should consider common standards, interoperability and the concept of a “portable accreditation” to help facilitate the switching process for merchants, and also prohibit restrictions that tie merchants to payment service providers.”
  • The UK needs to protect consumers’ access to cash.

UK payment market in 2019

The 2020 BRC Payments Survey revealed important facts about the UK market:

  • Cards dominate retail transactions:
  • ATV of a debit card purchase decreased modestly to £22.82, from £23.16 in 2018 as the use of contactless cards impact
  • Debit and credit/charge cards dominated the retailer’s payment costs in 2019, as the figure below shows:

The action needed

The BRC and other trade bodies have been banging on about the cost of payment cards for over 20 years. The problem is that when they feel they have achieved success, e.g. Interchange Fee Regulation (IFR) which was intended to slash the excessive charges levied on merchants and their customers, collected by card-issuing banks and went some way to tackling the perverse incentives of a market that drives, but the card companies and banks just put charges on other services.

This year, the BRC has listed the measures that are needed to protect consumer and business end-users of the card payment ecosystem:

  • The Competition and Markets Authority (CMA) should investigate and act

against the card schemes for abuse of their dominant market position in contravention of Chapter 2 of the Competition Act (1998)

  • The PSR (Payment Services Regulator) should investigate and act against the card schemes for circumvention of the IFR as transposed into UK law
  • The PSR should use its existing powers to abolish interchange fees in the UK, as advocated by the UK Supreme Court and practised effectively abroad
  • The Government should enhance the provisions of the IFR, as transposed into UK law and bolster the powers of the PSR to:
    • Cover all card types: bring commercial cards within the scope of the regulation
    • Cover all transactions: to include where only the merchant UK-based
    • ‘Utilitise’ scheme fees: similar to water and sewerage service pricing
    • Simplify card fees: limiting the range of card payment fees levied
  • The PSR should consider common standards, interoperability, and the concept of a “portable accreditation” to help facilitate the switching process for merchants, and prohibit restrictions that tie merchants to card-acquirers.

CTMfile take: Good luck. But given the current UK government’s incompetence on much graver matters, BRC stands little chance. Nice try though.


*  Conducted by the BRC for over twenty years, the Survey utilises an exclusive set of data from retailers to assess the changing approaches in the ways that customers choose to pay for goods.

+ Available to BRC members.

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