The UK is moving towards a cashless society contactless card transactions doubled last year but firms that make money from electronic payments would like to see the trend accelerate. Visa, one of the two dominant card networks in the UK, told the BBC last week that it is considering an incentive scheme to encourage UK businesses to go cashless. The scheme would be based on Visa's US initiative, under which it offered bonuses worth $10,000 each to 50 small- and medium-sized enterprises (SMEs) if they only accept cards.
Visa claims that cashless transactions are more convenient and secure. However, in reality, the merits of card payments remain finely balanced for many SMEs. For very large numbers of small retailers, restaurants, market traders and mobile tradesmen from plumbers to builders the advantages of card-based payments are undermined by the cost.
Businesses have to pay interchange fees the charges levied by the large banks and credit card issuers that operate the electronic payments system on each debit and credit card payment they accept. They also have to pay merchant services fees to the provider they choose to process their payments. These charges cover everything from the cost of providing card-reader terminals to running fraud checks, as well the basic transaction-processing service. Despite European Union legislation in 2015 that capped interchange fees, the economics of accepting card payments still don't stack up for all small businesses. Some try to pass on these costs to customers particularly where fees are disproportionately expensive for low-value transactions but this week the government announced plans to ban businesses from charging extra for card payments with effect from January 2018.
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So Visa's desire to move the UK towards the point where it becomes cashless looks unlikely to be realised for some time to come. Some consumers still insist on dealing in cash the Bank of England reckons as many as 5% of Britons rely almost entirely on cash while many SMEs would be worse off with a wholesale move towards card payments. However, for those that want to or need to accept cards, there are some tips below on getting the best deal.
Shop around for a better deal
The majority of firms simply opt for the payments service offered by their bank, even though this is unlikely to be the best choice for them. In fact, banks don't usually handle merchant services themselves. If you take your bank's merchant services package, it is almost certainly re-selling you a service that is actually being provided by one of the big specialists. These include Worldpay, Global Payments and First Data.
SMEs have the option of approaching these firms directly, which can mean they pay less for the same service. They can also use independent price comparison services such as Cardswitcher.co.uk to shop around between the various providers.
Merchant-services firms all structure their charges slightly differently, which means the cheapest service will depend on the nature of your business. If your turnover is low, or most transactions are small, for example, you may be better off with a different provider to a business with larger revenues. This means that shopping around is definitely worthwhile. Cardswitcher claims the typical SME currently using its bank for merchant services could save 40% by switching provider.
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