New pay methods 'challenge banks'

Updated: 
PaypalCustomer take-up of new payment methods such as PayPal which are cheaper to process is challenging banks' dominance, a study by retailers has said.

The British Retail Consortium (BRC), which compiled the research, said people's willingness to use new technologies showed that the existing charging regime has to change, which would ultimately drive down costs for customers as retailers' own costs are reduced.

The BRC asked firms about the development of self-service tills and contactless and e-payment methods, with those included in the survey taking almost 60% of total retail spending.

Non-card methods such as PayPal were used in 150 million transactions worth £1.2 billion last year, replacing the credit and debit cards from traditional card-issuing banks which would previously have been used to make these payments, the BRC said.


A third of retailers surveyed said they had accepted one of the emerging payment types - PayPal, Google Checkout or Amazon Payments - during 2011 and half indicated they will be ready to do so by the end of 2012.

The BRC said that the evolving payment methods are the cheapest way for retailers to accept payments. The average cost of having a credit or charge card payment processed is 36.2p, for a debit card it is 9.6p, but for non-card methods including e-payments it is 7.9p.

BRC director general Stephen Robertson said: "There are lessons here for the established commercial interests in the payments industry. Customers are adopting new ways of paying that deliver advantages for them and for retailers. Payment methods, such as mobile, PayPal, Google and similar products, are challenging the banks' market domination. Very quickly, those payment methods have gone from a standing start to accounting for £1.2 billion of retail sales per year.

"The message is - customers are choosing to use a payment method that doesn't always involve the banks and is the cheapest non-cash way for retailers to take money. With the market moving away from them, the banks should be making their transaction-charging regimes clearer and, above all, cheaper for retailers."

The Future Payment Methods Analysis research covered figures for 2011. The BRC also found that one in five of retailers' tills has become self-service and the range of retailers offering this way to pay has broadened. More than a fifth of tills in non-supermarket retailers, such as chemists, DIY stores and stationers, are self-service. A quarter of self-service tills are ready to accept contactless payments.

The survey includes results from more than 9.4 billion transactions in shops, including large chains and small independent shops, as well as online payments. Total UK retail spending in 2011 was £303 billion and transactions in the survey represent £178 billion (58.8%) of that spending.

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