Did you know that retailers are charged at least 20% more by the banks and card schemes to accept a transaction online compared with in-store?
This is especially puzzling when you consider that online transactions are so much easier to process for the banks because it effectively involves them only dealing with a single shop i.e. the website. And such transactions are well protected from fraud, being triple-secured through EMV (far too complex to go into here), so the banks can expect to take less of a hit on any fraudulent activity deriving from online transactions.
[For the record, the increasing levels of online fraud that you might have read about are caused predominantly by cards from overseas being used for payments in the UK and not from domestic users using UK-issued cards.]
It works out as being 20% cheaper for the banks to process these online transactions than it does for purchases made by shoppers in-store. This means the retailer is effectively paying 40% more for accepting tranactions over their website.
The banks and card schemes will do doubt justify this activity as delivering shareholder value. It’s a shame that this boost to their shareholders’ funds is coming directly from the ripping off of their customers – the retailers.
We all know that online is the one growth area of retail so it is doubly bad news that merchants are being heavily punished for growing this one bright spot of their business. The actions of the card schemes is arguably stifling growth in this part of the retail sector and retailers are getting frustrated (see report on The Retail Bulletin).
Part of the reason they are getting away with it is because of ineffectual controls by the government authorities. And what is rubbing salt into the wound for retailers is the current action by the government to force all its various departments to use ‘Purchasing Cards’ for the purchase of all work-related goods.
These cards, which are similar to a corporate credit/debit card, cost retailers a hefty 40% more to accept online compared with other payment cards, which means they are 60% more costly to accept than for a payment in-store with a personal payment card. It’s certainly a bitter pill to swallow for retailers.
Unfortunately I’ve lots more equally unsavoury stories and will be back with such tales in this irregular series of payment card rip-offs.