UK Research Note - Credit card surcharging
(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
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
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