Time for UK Retailers to Really Fight for Payment Choice

Posted on: 15/09/2018

I have been warning UK retailers for years that they badly need cash as an alternative to cards.

One reason, of course, is that card schemes go down. 

In recent months, we have had several serious failures, including at Visa Europe. Without cash, both retail sales and customer service standards would have collapsed.

If you think that the IT underpinning card schemes will ever be 100% resilient, you are clearly a fan of Hans Christian Andersen.

Another crucial issue is that cash offers competition to cards. In the final analysis, any retailer can refuse cards, if there is a viable alternative. Cash is a very viable alternative.

You only have to look at the payment processing cost comparison from the British Retail Consortium, who represent 80% of Big Box UK retailers, to get a clear picture of just how viable - and how big a competitor for cards - cash is. The average transaction cost is quoted in UK pence and the figures are from 2016.


Debit Cards: 5.55

Credit Cards: 16.00

Non Card Payments: 18.89

The British Retail Consortium (BRC) figures give crystal clarity.

Cash IS the cheapest payment method for UK retailers to process.

The BRC actually has a whole lot more to say about payments, especially the cost of card transactions faced by their members. The BRC claims retailers spent an extra £170 million to process card payments in 2017. Fees are now apparently approaching £1 billion a year.

The consortium is blaming the rise entirely on the card schemes, claiming that fees have jumped by 39% in 2017.

A 39% increase when cash is still around! More likely to be 139% if cash disappeared?

Here's Andrew Cregan, Head of Payments at the BRC "EU payment regulation introduced in 2015 delivered savings for the retail industry and consumers, but these benefits have now been eroded by increases in other card fees. 

"In fact, many smaller retailers have questioned whether savings were ever passed on by card companies. The BRC are now looking to the government and regulator to tackle the alarming increases to card scheme fees imposed on retailers...."

The BRC is, of course, within its rights to ask for the intervention of the "authorities". However, history tells us that effective intervention is extremely unlikely - and history did not include the tangled web of Brexit, which is the preoccupation of the current UK administration.

A better course of action would be for the BRC to actually start promoting cash sales. This would save their members money immediately and also help to ensure that cash remains a long-term competitor to cards. The card schemes are trying to force cash out. Affirmative action by the BRC could be very effective in pushing back against the card schemes, in the interests of retailers and their customers.

Another business trade association - the Federation of Small Businesses (FSB) -  certainly understands the importance of cash.

FSB National Chairman Mike Cherry recently said: “Access to cash is vital to local high streets all over the country. Many small firms are already miles from their nearest free-to-use cash point.....access to cash has already been restricted by thousands of bank branch closures in recent years.”

A strong statement by Mike Cherry but beyond talk, what is really required  is concerted affirmative action from all business trade associations,openly and energetically supporting cash as an alternative to cards. 

The BRC, FSB, Association of Convenience Stores (ACS) and the Petrol Retailers Association (PRA) could unite to thwart the monopolistic ambitions of card schemes. With so many acronyms working together, what chance would the plastic-pushers have?

ACS can make a particularly strong case for the continued relevance of cash, since they recently reported that 76% of UK Convenience Store purchases are still made using cash.

One idea I have for ACS and others trade associations representing retailers is that they could collectively launch a weekly "Cash Wednesday" as a focal point of promoting cash use. Customers could be encouraged to use ATMs and spend cash every Wednesday.  Such a cash "event" has been launched in the United States. Why not try it here?

Some trade associations seem to think that it is not fashionable to support cash. They are clearly forgetting that cash has been around for nearly 3000 years for one main reason: public acceptance. The vast majority of people in the UK still use some cash. Many use rather a lot of it! This is something to celebrate, not play down.

Burger King in New Zealand recently showed the way, at least in terms of not being prepared to accept all the impositions of card schemes. The burger giants told the schemes that they didn't care how fashionable or how much of a fad contactless cards were - they stopped accepting them because the card fees were far too high!

Well done, Burger King!

Speaking of restaurants, Visa have a scheme in the United States where such venues are paid $10,000 to stop accepting cash for payments.

Interesting. Does a one-off payment compensate for high - and, seemingly, inevitably increasing - card fees?

The time has come for business trade associations - and especially those representing retailers - to speak with one, very powerful voice. If they do so, they can score a victory both for their members and for the long-suffering British public.

UK businesses - and especially retail businesses - need cash to remain in use. It saves them money per transaction AND it offers viable permanent competition to cards. 

The public deserve the right to choose how they pay. Cash needs to be conveniently available and usable if that right is to be safeguarded.

Cash, cards, wearables and payment Apps can all have a part to play in Payment Choice for consumers - but cash will not automatically fill that role. Support is required, in the face of concerted efforts by vested interests to remove cash completely from the payment mix.

Cash, if promoted by retailers - and that includes by businesses locating ATMs on their premises - will be around forever!


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