Confusion reigns at the point-of-sale as retailers haven’t a clue what payment cards they are accepting from customers.
It used to be oh so simple – it was either a debit or credit card. But this is no longer the case in this world of myriad choices where loads of different card types are being launched into the marketplace. To add to the confusion, retailers are being charged different prices by the banks for accepting the various cards (but that is a different story).
The problem for merchants is that the card issuers (mainly banks, although the likes of Tesco are among them) are in collusion with the card schemes and are issuing ‘premium’ credit cards that are not all the same. They might look it but they are radically different when you peel back the skin and look at the fine print.
These premium cards are costing retailers 30% or more to accept than the plain vanilla cards that they have accepted for many years. And it will get even worse. The issuers have seen a loophole in their agreements with retailers and are using it as an opportunity to re-issue new cards (with supposed added benefits such as contactless capability, a loyalty programme, or insurance).
What they have chosen not to disclose during this re-issuing process is the hidden higher fees for retailers. They clearly hoped that retailers wouldn’t notice and largely to date they haven’t. But this is changing as the number of such cards in use is growing rapidly.
Over the last two years retailers will likely have seen growth in payments from such cards increasing from zero to 6% of their total sales, which represents a steep growth curve and one that is continuing on a sharp upward trajectory.
The first thing a retailer will know that they have accepted such cards for the payment of goods is when they receive their monthly bill from their acquiring bank and the payment charges have noticeably increased.
But retailers shouldn’t expect to see any lined details on their bills with information on who has been issuing these offending cards with their significantly higher fees. They will look just the same as any other card on the bill statement.
So what action can retailers take?
The first step is to ask their card acquiring bank to list and identify the cards that are costing them a lot more money to accept. Secondly, this information should then be sent to Vince Cable with a note asking the Government what exactly they are going to do about yet another example of the banks’ greed in the UK.
Cable can’t keep pontificating to the market about taking action when to date we have seen absolutely no action whatsoever.
I’ll be back soon with further depressing stories for retailers but in the meantime, if you didn’t catch my first column in July then here it is – Column One.
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