May 15, 2007

NEWS: Contactless to be Cheaper in UK

In light of the ongoing war about interchange fees raging among the financial institutions of the UK, British banks and international card organizations have announced that they will offer merchants lower fees for new contactless payment types. Visa International and MasterCard Worldwide are keen to have merchants jump on the contactless bandwagon, reports say, and are willing to offer merchants nice incentives to climb aboard. The British Retail Consortium and APACS suggested that banks are trying to round up as much merchant enthusiasm as possible for the national launch of contactless technology, which is set for a fall debut in London.

Merchants will likely pay percentage fees per transaction for contactless charges, unlike the fixed fee established for standard plastic. For purchases less than £10 (US$19.93), the cutoff under which no signature or PIN will be required, it is suggested that banks will lower the percentage for merchants to make acceptance more attractive. Currently, merchants pay a set fee to take debit, which ranges per merchant from roughly 10 pence (US.20) or less per transaction for large retailers who haul in many transactions to 19 pence per transaction for small merchants who do considerably less business in the same period. A percentage-based fee is more attractive, then - compare 1% to 1.5% on a low-value contactless purchase of £5, which would amount to only a 5 pence to 7.5 pence charge for the merchant.

An APACS rep agreed that it would be unlikely that merchants would be willing to accept contactless, of which transactions will overwhelmingly come under £10, for the same fees as debit. It would just not be financial prudent.


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