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Customers shifted further from cash to cards even before pandemic – at a cost to retailers

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Customers’ shift from cash to cards for retail payments accelerated quickly in 2019 as shoppers turned online and used contactless to pay in shops, the latest figures suggest. Sixty-one per cent of retail payments were made using a card in 2019, according to the latest BRC Payments Survey, up from 54% a year earlier. At the same time, the cost of accepting payments reached a £1.1bn cost for retailers, including £950m in fees from card payments.

That’s only set to increase during 2020, with shoppers encouraged for face-to-face payments and as ecommerce accounts for an even greater share of retail sales – put at 40% in September by the latest BRC-KPMG Retail Sales Monitor.

Five retail groups – the British Retail Consortium (BRC), British Independent Retailers’ Association, Association of Convenience Stores, Federation of Small Business and UK Hospitality – are now calling for action to limit the cost of accepting payments. The BRC says that shops are currently charged an average of 18.4p per credit card transaction, 15% higher than in 2016, and 5.9p for a debit card transaction (+6%) – while accepting cash costs an average of 1.4p per transaction. Many of those selling online have been given notice of new fees that will be charged for e-commerce payments. The BRC is warning that costs, equivalent to £40 per household, will now be passed on in consumer prices. 

Andrew Cregan, head of finance policy at the British Retail Consortium (BRC) said: “With card payments accounting for almost 80% of retail sales, it is vital that the government takes action to tackle excessive card costs. Without action we will see businesses put under further pressure and it will be consumers who are forced to pay the price.”

The rise in card sales came as UK retail sales reached £394bn in 2019, 3.4% higher than the previous year. The BRC study, which analysed data from 5.3bn retail transactions taken by retailers accounting for 28% of the retail industry, found that UK shoppers spent £227.7bn on debit cards – accounting for 57.8% of spending, and 48.2% of transactions. That was followed by £80.8bn on credit cards (20.5% of spending /12.4% of transactions), £77.6bn cash (19.7%/36.9%), and £7.9bn (2%/2.5%) on alternative payments. 

Jeff Moody, commercial director of the British Independent Retailer Association, said:
“The contracts available to large national chains are often not available to individual smaller independent retailers, with card transactions now the majority of their payment transactions, these costs are therefore being felt by consumers.”

The call comes as a UK government call for evidence on the payments landscape closes today.

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