The British Retail Consortium (BRC) has released a new survey suggesting that consumers are switching from credit cards to cash, thanks to the slowdown in the economy.
According to BRC figures cash is now used in 60 per cent of all transactions, up from 54 per cent this time last year. Measured by value cash is now used in 34 per cent of retail spending, up from 32 per cent last year.
Stephen Robertson, director general of the BRC, said, Reports of the death of cash are premature. Cash is not only alive, it's thriving. Hard up customers are increasingly reluctant to spend money they haven't actually got in their hands. While total retail spending continues to grow, there is a widening gap between the amount spent in cash and the amount spent using cards, suggesting customers want to keep tight control of their finances.
The survey, Cost of Collection, has results from over 17,000 shops of different sizes, with a total turnover among them of £131 billion per year (representing over half of UK retail sales). The survey indicated that for many retailers cash was the most effective way to receive payments and that credit card companies impose high costs on retailers for transactions.
Cash transactions cost an average of two pence for retailers, while debit and credit card transactions cost an average of eight and 34 pence respectively. In total these costs meant retailers responding to the survey were charged £516 million in 2007, 82 per cent of which was related to card payments.
The BRC has called upon card companies to reduce these charges. Stephen Robertson said, The BRC has consistently said these unjustifiable charges cost customers because they are so high retailers are forced to pass them on. As banks move to replace cash, they must acknowledge the very low costs they actually incur.
Banks should not be exploiting new payment systems as a way of taking extra money from shoppers. There should be a lower fixed fee per transaction which actually reflects the cost of processing, so new technology brings balanced benefits to retailers, consumers and banks.