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Retailers lobby for lower charges for contactless payments

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New payment technologies should be cheaper to use than existing card systems, not more expensive, retailers have said. Shop operators have claimed that card fees are already too high, running into hundreds of millions of pounds in the UK.

The British Retail Consortium (BRC) has published the results of a survey of 2009 spending which found that 44 per cent of buying is done on debit cards, while 32 per cent is still in cash. Cash buying rose on the previous year's figures because of the recession, the BRC said.

While each cash transaction cost an average of 2.1p to process, debit card transactions cost 8.9p and credit card transactions cost 33p. The BRC said that banks and technology companies should ensure that any cost savings from the use of emerging payment systems are passed on to its members.

"Retailers are seriously concerned that banks plan to make the higher debit card charging regime the norm for the emerging contactless and mobile phone payment methods," said a BRC statement. "If that happens, retailers would face huge increases in their costs as these new ways of paying replace cash – particularly for low value purchases."

"With payment technology and efficiency developing, card charges should be going down not up," said Stephen Robertson, director of the BRC. "'Contactless’ systems can bring benefits but banks are currently levying charges on card payments well beyond what it actually costs them to process those transactions. They can’t expect to maintain those excessive charges as numbers of non-cash payments grow."

The BRC said that the kinds of technologies that will replace cards – such as RFID chips as used in the Oyster cards used in London's transport system – should reduce, not increase costs.

"Any cash replacement product needs to be charged on a pence per transaction basis irrespective of the transaction value at a cost that is similar to the current cash transaction cost of 2.1 pence," said the results of its survey.

The BRC, though, said that shop owners reported that card usage costs are rising.

"Retailers are … unhappy that banks are deliberately creating new card products - with much higher charges for retailers – and moving customers across to them," said a BRC statement. "HSBC (among others) is to rollout new ‘premium’ or ‘World cards’. They attract additional interchange fees of between 0.7 per cent and 0.9 per cent on top of the average 0.75 per cent of the transaction value that the retailer previously paid."

The BRC said that its report is based on details received from retailers responsible for £151 billion in UK retail sales, which its says represents 53% of the retail market. It said that payment processing cost those retailers £588 million in 2009.

Credit cards are far less frequently used than cash or debit cards, but their costs are higher. The BRC said that it costs a shop 33p on average to process a credit card payment.

"£278 million (47 per cent of [the] total) is spent on credit cards acceptance – yet these transactions only represent 11 per cent of total transactions," said the BRC report.

The BRC said that bank charges for collecting debit card payments were rising, and had almost doubled in the last five years.

See: The report (5-page / 241KB Word document)

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