Policies & Issues: Payments
The latest BRC annual survey on the cost of collections, covering 2006, shows that cash is still king for the consumer.
The survey represents 1/3rd of UK retail sales representing approximately 10,000 retail outlets. The results differ significantly from those previously produced by Visa and challenges recent media comment on the demise of cash.
Survey results show that cash accounts for more than 54% of transactions, more than £32 in every £100 spent at retail outlets is in cash.
Cash remains the most cost effective method for retailers to accept customer payments. A £20 cash transaction will cost the retailer 3.8p or less compared to a £20 credit card transaction which will cost the retailer at least 17.4 pence.
In order to ensure broad acceptance within the retail sector any new card based cash replacement card needs to be cheaper to process than cash – typically less than 2.5p for the average cash transaction
The annual cost of payment collection for those retailers completing the survey amounted to £317m
- 79% (over £247m) is being paid directly by retailers in merchant service charges for all card types.
- £162m (51%) of the total cost is spent on accepting credit cards yet those transactions only represent 22% of sales turnover.
The use of cheques continues to decline and is now insignificant to most retailers.
Debit cards now account for 44% of UK retail sales value, a massive growth considering they have been around for only 20 years.
As a result of their substantial investment in the new Chip and Pin Technology, retailers' losses due to card fraud and bad debt reduced by 17% during 2006.
The Retail Payments PAG continues to actively monitor developments in this area. The key criteria for an acceptable scheme for retailers are: cost, speed of transactions through the tills and fraud. Any move to replace cash must take into account the very low costs incurred today.
Card-not-present fraud is on the increase. In 2006 it amounted to £212.6 million, an increase of 16%. Since 2003 it has grown by 74%. Card-not-present describes the purchase of goods and services via the internet, phone and mail order.
Retailers are obliged to accept the cards under the honour all cards rule. The concern for retailers is the level of interchange fee they have to pay despite there being no risk to the Card Issuer as there is always a credit balance on the account.