A fascinating
report
from Cards International confirms what most retail merchants have
been saying for years - banks are ripping them off with charges!
What’s even more concerning is that retailers feel that they are
suffering ‘unjustifiably’ high fees on credit and debit card sales and
that these will become the norm for emerging contactless and mobile
phone payment methods, according to the British Retail Consortium (BRC).
As if we haven’t had enough issues already raised by lack of Near Field
Communication (NFC) enabled devices, revenue sharing arguments, crossing
of traditional boundaries and who should actually be the driver of
contactless transactions, we now have concerns of overcharging by banks
at the merchant level. What chance do we ever have of getting NFC
broadly accepted?
BRC director general Stephen Robertson has argued that as payment
technology develops card charges should be going down, not up and he
would have many supporters.
“There is no justification for such big differences in charges between
cards and cash,” said Robertson. ‘Contactless’ systems can bring
benefits but banks are currently levying charges on card payments well
beyond what it actually costs to process these transactions. They can’t
expect to maintain these excessive charges as numbers of non-cash
payments grow.”
A survey from the BRC shows accepting payment by debit card costs a
retailer four times more than when a customer uses cash. In addition,
bank’s charges for handling debit card payments have almost doubled in
five years.
An average cash transaction in the UK costs retailers 2.1 pence, a debit
card payment costs 8.5 pence, and a credit card payment costs 34 pence.
The BRC claim that if charges for every payment method were as low as
they are for cash, its members could pass on £480 million in cost
savings to their customers.
Cash, however, is the preferred method of spending according to the
survey, amounting for 58 percent of all transactions. This is up on 56
percent in 2008 but down on 61 percent in 2007.
“Cash is still the most popular way of paying and the cheapest for
retailers. Cash use had a boost in the recession. Many people find
managing their spending easier with cash – you can’t spend what you
haven’t got. But the longer term trend suggests cash use will slip
gradually,” added Robertson.
No matter how many NFC and ePayments conferences I attend I still find
that the finance and communications industries still cannot come to
grips with how it should all work. Credit and debit card transactions
have always been the domain of the finance industry, NFC sits firmly in
the domain of the transport industry (in terms of take up) and mobile
devices the domain of mobile operators. Putting them together to achieve
NFC via mobile phones means that all the players have to work in
harmony and work out how to share revenues. Mission impossible? Almost.
It all works fine in Japan and Korea, probably because mobile phones are
more prevalent than credit and debit cards and it makes sense to use
the phone as a payment device. The transport industries also backed the
technology.
Talking to credit and debit card providers indicates that there a few
cost savings going NFC as they will still have to supply plastic cards
to customers in case they forget their mobile NFC devices. Mobile
operators want someone to pay ‘rent’ for the use of their secure SIM
devices. Banks want secure transactions to reduce fraud. If banks are
charging over the odds for these transactions it hardly leaves any space
for other players and demotivates merchants who are the real adopters
of the technology.
What is most likely to happen is that each of the traditional players
will try and play all the roles, on their own. Card issuers will provide
their customers with non-SIM devices such as stick-on NFC labels, or
wafer-thin SIMs that reside with existing SIMs. CSPs will try to act
like banks and offer ePayment and mobile banking options. and merchants,
especially transport companies, will simply go for the lowest cost
option.
Posted
07-02-2010 10:09 AM
by
The Insider