The Rising Cost of Card Payments: A Challenge for UK Retailers

The ever-changing retail sector is finding it increasingly crucial to keep a close eye on profit margins. The explosion of card payments, while initially welcomed, has inadvertently escalated costs for retailers, tightening already slim profit margins. A recent report by the British Retail Consortium (BRC) disclosed that retailers faced costs of £1.3 billion merely from accepting card payments in 2021. This financial burden, coupled with increasing credit card delinquency and consumer financial stress, highlights an industry in desperate need of decisive action.

The Struggle with Card Payment Costs

The pandemic has seen cash transactions dwindling, cornering retailers into relying more heavily on card payments. Cash transactions fell to a scant 15% of all transactions last year, while debit card payments rose to account for 67% of consumer spending. However, this shift has not been without issues. Fees for debit card schemes grew 28% compared to 2020, adding an extra £141 million in costs for retailers. Small businesses are further strained with merchant processing fees that range from 1.5% to 3.5% per transaction.

Rising Credit Issues and Consumer Financial Stress

A report by FICO reveals a month-on-month increase in customers missing at least one payment. The number of accounts with one missed payment rose by 10.8% in a single month and by 9.2% year-on-year. This trend highlights a concerning level of financial stress among consumers that could spell trouble for retailers in the future.

The Regulatory Hurdle

The Payment Systems Regulator has taken steps to review card fees. However, tangible changes could still be two years away, a wait retailers cannot afford amidst the escalating cost-of-living crisis. The industry requires immediate solutions.

Tymit’s Solution: A Blend of Innovation and Customer Value

Tymit offers a co-branded instalment credit card program that seamlessly integrates with existing payment systems. This solution offers a transparent, cost-effective payment option customised to the unique needs of retailers and merchants. The system slashes merchant fees, provides real-time data analytics, ensures robust security, and enhances user experience. Furthermore, it empowers retailers to offer flexible payment plans to their customers, promoting financial prudence and fostering customer loyalty.

The Urgency for Change

Hannah Regan, payments policy advisor at BRC, called for urgent intervention from the Payments Systems Regulator and the Treasury to prevent card schemes from exploiting their dominant market position. The focus is not on whether adopting new payment technologies is affordable but rather on the necessity of doing so in today’s financial climate.