As card use soars, UK retailers demand urgent intervention on interchange and scheme fees

Posted: 14th December 2022

The British Retail Consortium is calling for emergency intervention to prevent price gouging by the major card schemes after unveiling figures that showed a dramatic shift from cash to cards during the pandemic.

The BRC report reveals that in 2021, as stores closed for lockdowns and the public was advised to use contactless payments, cash usage fell by half to just 15% of all transactions, while 82% were made on credit or debit cards. More than four-in-five card transactions were made using debit cards, with the rest made up of credit and charge cards.

As a proportion of total money spent, cash accounted for just 8% of consumer spend (down from 15%), while credit cards rose slightly to 23%, and debit cards rose significantly to 67%.

The rise in the use of card payments in part reflects the increase in online shopping in 2021, when 48.6% of non-food items were purchased online. This figure has fallen to 39.9% in the first 11 months of 2022, as more people returned to the high street as the pandemic eased. As a result, it remains to be seen whether this shift to card payments will stick.

While card usage soared, so did the costs associated with accepting these payments, says the BRC Retailers incurred costs of £1.3 billion just to accept card payments from customers in 2021. Debit cards, which accounted for the majority of transactions, saw scheme fees rise by 28% compared to 2020, and total Merchant Service charges increased by 12%.

The lobby group says this translated into an additional £141 million in costs imposed by card firms onto retailers to process debit card transactions.

Mastercard has hit back at the BRC’s claims. In a statement to Finextra, the card company says: “We simply don’t recognise these overblown claims of the BRC. Mastercard offers UK retailers one of the lowest cost and safest ways to accept a payment. On a typical £50 sale, Mastercard’s fee is just 6p and this allows us to provide the services our customers can rely on. Without electronic payments, millions of consumers can’t make payments and businesses won’t make sales.”

The Payment Systems Regulator (PSR) has kicked off two market reviews into card fees and post-Brexit interchange charges levied by the card schemes on UK merchants. However, the watchdog has warned that merchants may have to wait a further two years before it concludes its investigations.

The BRC is calling on the regulatory agency to enact temporary interventions to stop card fees rising during this period. The retail body is also demanding the removal of interchange fees and for UK Treasury to cpnduct its own review into the cost of accepting cards

Hannah Regan, payments policy advisor, British Retail Consortium says: “With the public in and out of lockdown and cash usage discouraged last year, over 90% of retail spending used debit or credit card. With card usage soaring, already hard-pressed retailers had to pay huge sums to accept these payments. We need urgent intervention from the Payments Systems Regulator and the Treasury to stop card schemes from abusing their dominant market position.”

Categories: Cashless Society
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