Cash Processing VS Credit Card Processing
This is the ongoing debate at the moment, and since The British Retail Consortium (BRC) brought out their report detailing the fees associated with debit and credit card processing, and the fees attached to cash payment processing, there has been a lot of contention about whether or not the banks should reduce these merchant fees.
Because there are three main ways of paying these days (Cash, Credit Card and Debit Card) there is little point in evaluating the costs for cheques and store cards etc; according to the BRC cheques amount for less than 1% of transactions at the moment and this will soon be zero as retailers become more selective.
If groups like The Payments Council want to streamline the retail payment processing industry then they will have to consider that cash payments are not going to decrease whilst merchant fees for credit card processing are still high. The retailer still has a choice in the matter. Whilst cash payment isn’t going to lose it’s appeal anytime soon, a growing and buoyant market exists for credit and debit card payments – consumers expect to be able to pay with their card and the retailer must decide on whether to adopt the technology to process the payments.
At European level
If we look much further afield we can also see that it is pretty much the same in Europe; at least Western Europe. In Europe cash payments amounted for over 78% of retail transactions in 2008, despite the steady rise in cashless payments. The move to replace cash in Europe is not going forward at the pace that was expected and a cashless society is still some way off.
Because cash is clearly still very popular, and despite those who would say it’s dying out as a retail payment option, and very strong in the UK and the rest of Western Europe, a cash alternative is almost certainly going to be created; particularly if merchant card processing fees prohibit business from entering the card processing arena due to cost.
It does appear that at the moment the war between cash and cards is not being won by the new payment methods. New merchant account providers are bucking the trend in traditional charges and offering better services for lower cost – this is a trend that will continue and will drive the card processing industry forward.
A substitute for cash could be on the cards then, and this will have to be thought out by The Payments Council in the UK, the Payment Services Directive, and the Single Euro Payments Area (SEPA).
The near future looks bright and as companies come on board to challenge the traditional bank acquired merchant services, this can only serve to reduce merchant fees and make card acceptance possible for all business.
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