April 22 2008

Cash is still king on the high street

The British Retail Consortium (BRC) has released the results of its Retail Cost of Collection Survey for the 2007 Calendar year and it’s not good reading if you’re called Visa or Mastercard.

The 2007 Retail Cost of Collection Survey shows that on the high street cash is still the main way we prefer to pay for goods, and given the current credit climate we’d be very surprised if it doesn’t improve its position in 2008.

The key findings of the survey include:

·         Cash accounts for more than 60% of all transactions and is still the most popular method of payment with consumers

·         £34 in every £100 spent at retail outlets is in Cash and each cash transaction costs retailers less than 2 pence to process.

·         Debit cards are the next most preferred method of payment and account for 43% of  UK retail sales value costing 7.88p per transaction

·         The average credit card transaction costs the retailer 35p

British Retail Consortium Director General Stephen Robertson said: “Reports of the death of cash are premature. Cash is not only alive, it’s thriving. Hard up customers are increasingly reluctant to spend money they haven’t actually got in their hands. While total retail spending continues to grow, there is a widening gap between the amount spent in cash and the amount spent using cards, suggesting customers want to keep tight control of their finances.”

Retailers responding to this year’s survey were charged £516 million in 2007 of which 82 percent (£424 million) related to card payments.

The BRC is accusing card companies of pushing cashless payment methods as a way of further boosting their own revenue.

The BRC says, in making moves to replace cash, card issuers and banks must acknowledge the very low costs they actually incur and reduce charges for processing these card payments. If cash replacements, such as ‘Touch and Go’ card systems, are to be accepted by retailers, charges must be below those for handling cash.

British Retail Consortium Director General Stephen Robertson added: “The BRC has consistently said these unjustifiable charges cost customers because they are so high retailers are forced to pass them on. As banks move to replace cash, they must acknowledge the very low costs they actually incur.

“Banks should not be exploiting new payment systems as a way of taking extra money from shoppers. There should be a lower fixed fee per transaction which actually reflects the cost of processing, so new technology brings balanced benefits to retailers, consumers and banks.”

So what does this tell us about accepting cards over the internet?

If you look at the results of this survey and at the results of the US Javelin survey it would seem that credit cards have had their day, both with the general public who are less likely to run up large credit card bills than they were in the ‘80s and ‘90s and with you the retailers because they’re uneconomic, and are the source of nasty things like chargebacks. So if all you’re offering is the option of payment by credit card then be prepared for fewer transactions in the next year. While we’re not saying this is the end of credit cards, we are advising retailers that they should look at the alternatives and make sure you use at least a few of them.

by Marcus Austin (Web Editor)