[Dave Birch] I am frequently, and with good reason, accused of being over-optimistic about the ability of digital money to replace to cash.  But now Peter Ayliffe, the head of Visa Europe, has said that within five years credit and debit cards should be cheaper and more convenient than cash and that, as I have long anticipated, retailers could start surcharging customers if they choose to buy products with cash, because of the greater cost of processing these payments.  The British Retail Consortium (BRC) dismissed his view and said that Merchant Service Charges (MSCs) are still too high because of the interchange component.  One member of the consurtium said that the estimated interchange was 4p per transaction.  The retailers object to the interchange because they say that it is used to fund stuff like cashback and frequent flyer miles rather than payment processing.  "There is a duopoly between Mastercard and Visa in the UK. Their setting of fees is anti-competitive" said Nick Mourant, treasurer at Tesco, which currently handles about one-eighth of all retail payments by volume in the UK and has 31% of all UK supermarket spending.  The payments industry might reasonably point out, however, the 97% of all cash withdrawals at ATMs in the UK are free: so someone is paying for the machines, networks, security guards, armoured trucks and everything else that goes with ATMs and it’s not the people using cards.  If it’s not going to be customers, then why shouldn’t it be retailers?

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The organisation that makes serious money out of cash is the Britain’s most profitable nationalised industry, the note issuing business of the Bank of England.  According to the BBC today, the new Bank of England £20 note — which features that well-known Englishman, Adam Smith — costs 4p.  That’s quite a margin!

Note to foreign reader: the apparent outburst of atypical xenophobia in the reporting of the new £20 note design is because, for bizarre historical reasons, Scotland has its own banknotes that are different to English banknotes.  And Adam Smith, as every fule know, was Scottish.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

1 comment

  1. “Apacs says cashless society as likely as paperless office
    Figures on the use of cash in the UK, released by the payments association Apacs to coincide with the launch of a new £20 note, show that Britons show no signs of abandoning cash any time soon. This is despite predictions from Visa of a cashless society by 2012.”

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