>> What everyone seems to be missing is that we should be looking at the level
>> of the merchant fees charged. Handling cash and cheques is much more expensive for the
>> bank than electronic payments, which at the end of the day is all a payment
>> card is.
Absolutely right. If businesses were passing on the cost of disbursements for processing the txn then the amounts would generally be a lot lower. Do that for cash and it would probably be the most expensive way to pay. Complicated, but fair, sort of. Lots of complication including with VAT.
Remember a few years ago when various retailers including M&S declared their prices to be inclusive of a 2.5% card processing fee? So they accounted for £100 sale e.g. by breaking it down into (at 20% VAT):
Ex Vat price £81.30
VAT £ 16.26
Fee £ 2.44
instead of 83.33 + 16.67 VAT, hence saving themselves 41p VAT on every £100 sale. HMRC won the case, eventually.
There's a lot more to this than any newspaper or news website will bother to find out or to tell you.
For years the EU competition authorities were concerned with lack of competition on merchant fees. I'm not writing it out again, I posted this in 2015:
(The problem, for anybody not familiar with it, is that most of the merchant fee on card transactions consists of the interchange fee, levied by the network (e.g Visa or Mastercard) via the payment processor and given to the issuer. This is a major part of the income of a card issuer and is essentially what funds your interest-free period. There is no competitive pressure in this at all because shops have to accept all cards (or none) from a network, and charge the same price to everybody. A brilliant wheeze the industry came up with was 'premium cards' offering more cardholder benefits and cashbacks. These cards carry a higher interchange fee, which just carries through into retailer pricing. The only way to contain this is through regulation).
The industry as can be imagined was very annoyed about downward regulatory pressure on interchange and the retailers of course were happy. Credit card interchange has indeed come down but the networks have responded by pushing up debit card txn fees.
PeterS is right to say that customers paying by card are subsidised by those who don't, but only up to a point. Credit card customers are subsidised by debit card payers. But if everybody paid cash, prices would go up.
As for Ryanair - just adding on what they can get away with. No different to Motorpoint's "administration" fees and cinema booking fees. The only way to look at it is to consider what you pay and what you get - When they have done that a lot of people still want to fly Ryanair.
What might result from this is a lot of people using credit cards where they would have used debit - which will result in higher seller costs and ultimately higher prices.
|
