Payment processing and cash collection fees levied on the retail industry by banks have been branded “illogical and unjustifiably high” by the British Retail Consortium.
In its annual payments survey, released today, the BRC said the banking charges were costs that retailers had no control over and therefore remained difficult to manage.
Retailers taking part in the survey — which measured nearly eight billion transactions — paid out a total of £659m in fees for payment processing and cash collection last year.
Stephen Robertson, director general of the BRC, said that although retailers are minimising the costs they can influence by investing in anti-fraud technology, the payment charges imposed by banks were still far too high.
“The question is should this money be going into increasing banks’ profits or to keeping shop prices down for customers?” he said. “Reducing the charges banks impose so they genuinely reflect the actual costs involved in processing these transactions is the right answer.”
TheBRC’s report also revealed a major change in consumer payment habits. It suggests customers are turning from credit cards to cash and debit cards to avoid spending money they don’t have.
Credit card transactions fell by 13% last year, while debit card usage rose 16%.
Cash was involved in a smaller proportion of transactions than a year earlier but used for a greater proportion of overall retail spending as the average amount spent in each cash transaction increased by 13% to £12.93.
The BRC also said that retailers are investing to cut the costs they can influence. Fraud losses fell by a massive 37% compared with 2009 as investments in technology, such as the latest secure card readers, new levels of internet security and note checkers at tills, paid dividends.
On average in 2010, each retailer paid almost 2p per cash transaction to have the money transported and banked.
Despite the efficiency of electronic systems, the average charge for processing a credit card payment was 37p compared with a debit card average of 9p.
Cash is used in 55% of transactions but makes up more than 11% of retailers’ payment costs. Credit cards are used in only 10% of transactions but account for a staggering 45% of retailers’ costs.
Debit cards are used in 34% of transactions and represents 38% of retailers’ costs.
“Hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got,” said Robertson. “At the same time, use of credit cards has dropped sharply. Cash remains king — used for more than half of all retail payments.”