New cap on credit card fees, but how can retailers save money?
The European Parliament has introduced legislation to cap the charges paid by retailers to card providers. This is a positive step for retailers as this new EU legislation will ensure that banks across the EU cannot charge retailers any more than 0.3% for credit card transactions and 0.2% for debit cards. Previously, retailers were paying 0.85% and so are now estimated to save £480m a year.
Whilst retailers will see huge savings, there is more that they can introduce, such as consumer friendly mobile payments, to improve their financial position. Savvy businesses should be looking to products like Pay by Bank app to see how mobile payments could increase sales and save retailers further on transaction fees.
A report commissioned by Zapp from the Centre for Economics and Business Research demonstrated that by shifting from cash, credit and debit cards to mobile payments, retailers could make annual savings of £463m. This saving is largely due to the large transaction fees providers charge as well as the costs and risks that come with handling cash e.g. time spent counting and preparing cash, as well as bank charges associated with cash.
Aside from a saving in transaction costs, there are additional gains to retailers and consumers from mobile payments in the form of improved shopping experiences.
By improving customer journey experiences and checkout times in e-commerce and m-commerce, slick mobile payment systems can significantly reduce the amount of online shopping trolleys that are abandoned before purchase. The Cebr estimates that, if average checkout times could be reduced to 22 seconds, the share of online shopping carts abandoned due to long process times would fall from 14.3% to just 9.8%.
Retailers can also benefit from prompt payment given the instant settlement offered by systems such as Pay by Bank app.
Forward thinking retailers will be taking note of this and ensuring that their mobile strategy is optimised for mobile payments and a better customer experience. We look forward to launching Pay by Bank app with these retailers later this year.