The costs for small organizations are massive when it concerns getting a merchant account from their bank to take credit cards. Credit payment processing is in critical need of a change in the way in which merchant costs are charged. What exactly are the merchant services that small firms pay for, and are they paying too much?
Merchant Services Costs
The British Retail Consortium (BRC) has produced a very detailed report based on the prices of payment processing in 2009. Their conclusions are interesting and tell us that from the primary payment methods available to the public: cash, cheque, charge cards, debit cards, cash, and finally credit cards, it is this final one, the credit card that is responsible for the bigger portion of the expense of payment collection.
Out of ?588.4m in 2009, 47.2% of this was paid in order for retailers to collect payments from credit card purchases, at an average of at 33 pence per transaction. That is costing the enterprise owner 33 p for each transaction to get their money. So where does this money get spent? We don’t think that the bankers are quite eager to give up this info, but we believe that there requirements to be a sizeable change.
The largest price relating to pay processing is the merchant service cost, and this accounts for 81.2% of the transaction fee. The rest is paid for such things as: fraud, cash in transit, bank charges and cheque guarantor. The merchant service fee covers such things as: processing costs, card issuers’ interchange costs, and card scheme prices.
What may be done?
The BRC recommends that the processing rates really should be billed on a pence per exchange basis much like cash, and absolutely more in line with its 2.1p fee per purchase. But to be able for the BRC’s recommendations to be carried out, credit processing premiums must be reduced together with bank rates to be able to make things fairer for the small business operator who is probably going to get hit the hardest of all by the merchant services cost.
Cash remains probably the most well-liked form of payment in the UK and retailers can handle the merchant prices related to this simply because they are sensible. Nevertheless, if cash is to lose its energy as quite a few would say, then unsurprisingly debit card and credit card transactions are gonna amount to a more significant portion of sales in the near future. At the present time cash signifies 52% of sales in 2009, but it was 60% in 2007; so there is absolutely a slow-moving drop in its make use of. At the other end of the scope debit and credit card purchases are definitely increasing; not fast, but certainly growing.
If this is indeed what organisations like The Payments Council want to see happen, then the BRC really ought to be taken seriously and merchant service fees must fall into line in order to make the modification less complicated and less damaging to small business owners and those who find credit payment processing a draw on their resources.