Merchant Services – The True Charge
Merchant Services – The True Cost
The costs for small businesses are substantial when it relates to getting a merchant account from their bank to accept credit cards. Credit payment processing is in frantic need of a big change in how merchant rates are charged. What exactly are the merchant services that small business owners pay for, and are they paying too much money?
Merchant Services Charges
The British Retail Consortium (BRC) has developed a quite comprehensive report based on the charges of payment processing in 2009. Their findings are interesting and tell us that from the principal payment methods available to the public: cash, cheque, cost cards, debit cards, cash, and ultimately credit cards, its this final one, the credit card that is accountable for the greater amount of the expense of payment collection.
Out of ?588.4m in 2009, 47.2% of this was paid to be able for suppliers to collect payments from credit card buys, averaging at 33 pence per exchange. That is costing the enterprise owner 33 pence per deal to obtain their money. So exactly where does this money get spent? We really don’t think that the bankers are quite keen to give up this information, but we do think that there needs to be a considerable change.
The largest expense linked to pay processing is the merchant support charge, and this accounts for 81.2% of the transaction fee. The rest is paid for such things as: fraud, cash in transit, bank rates and cheque guarantor. The merchant service fee covers such things as: processing charges, card issuers’ interchange service fees, and card scheme rates.
What can be done?
The BRC recommends that the processing costs should be billed on a pence per deal groundwork akin to cash, and surely more in line with its 2.1p fee per exchange. But in order for the BRC’s recommendations to be carried out, credit processing fees must be lowered together with bank costs to be able to make things fairer for the small enterprise operator who is inclined to be struck the hardest of all by the merchant services fee.
Cash remains by far the most preferred form of payment in the UK and suppliers can cope with the merchant rates linked to this simply because they are reasonable. Even so, if cash is to lose its strength as quite a few would say, then unsurprisingly debit card and credit card purchases are going to amount to a bigger portion of sales in the near future. Right now cash represents 52% of sales in 2009, but it was 60% in 2007; so there is unquestionably a slow-moving decline in its make use of. At the opposite end of the scope debit and credit card transactions are surely on the rise; not fast, but absolutely mounting.
If this is really what organisations like The Payments Council want to see occur, then the BRC really must be taken seriously and merchant service fees must fall into line in order to make the change less difficult and less harmful to small organizations and folks that find credit payment processing a draw on their resources.
Published: March 9, 2012, 14:37 | Comments Off on Merchant Services – The True Charge