(2 June 2009 – UK) Due to the ubiquity of credit cards and the mounting net cost of processing these payments, many merchants around the world now impose ‘handling’ or ‘convenience’ fees on credit card transactions.East & Partners has released its second UK Research Note which discusses
credit card surcharging as a cost recovery and margin opportunity for the UK
merchants. East discusses that surcharging has come to be viewed among merchants
as a chance to influence consumers’ payment choice and play the role of a
“traffic controller” in the payments market.
UK merchants have been able to surcharge since 1989 and many of them have
embraced the practice. Credit card holders in the UK now pay surcharges for
online ticket purchases, when booking flights and even when paying their phone
bills.
East’s UK Research Note discusses the two main influences on a merchant’s
decision to surcharge: the cost of processing credit cards and the degree of
market power held by the merchant. This is backed by evidence on differential
surcharging and an overview of the types of merchants which have traditionally
been the ‘first movers’ on surcharging.
East says that recent APACS card statistics suggest some UK consumers have
already started to substitute credit cards with debit cards for everyday
purchases, a trend which has been seen in Australia and around the world. Credit
card surcharging can further amplify these trends by acting as a disincentive to
use a credit card.
East’s Research Note concludes by discussing the implications of credit card
surcharging on the acquirers. As merchants increasingly take up surcharging,
acquirers need to stay abreast of the evolving service requirements in relation
to the practice, providing support and guidance to their merchant customers.
For more information about East & Partners’ UK Research Note please contact
Robert Morgan at robert.m@eastandpartners.com