This winter is going to be a challenging period for businesses of all sizes – and many will be looking for ways to save money. One often overlooked way to do this is to look at how much you’re spending on payments. Banks and other financial service providers charge a fee on every transaction made on card. Consumers tend only to notice card fees when travelling abroad, but businesses are losing a significant portion of their revenue in card fees. These fees have been rising since regulation of card schemes changed with Brexit, and are now costing British businesses approximately £5bn per year. More than 250,000 businesses are backing the Axe the Card Tax scheme to draw attention to this issue. In the meantime, there are steps both businesses and consumers can take to minimise these costs.
- Track your processing costs
Many SMEs never check how much money they are losing out on card processing fees. Make sure you are keeping track of these costs. Often, they will be higher than you expect.
One of the challenges of card payments are the ‘hidden’ costs that businesses incur. There is no uniform payment charge on transactions, which can present challenges to small businesses in how they financially plan. Do your due diligence, understand where you are losing money in unnecessary fees, and head to point two to look for the alternative that best suits your needs.
- Shop around to find the payment provider that best fits your business
~Novel Serialisation: Heavens Fire~
For small businesses in particular, the time you spend looking into alternative payment providers is never time wasted. It could save you thousands of pounds every month.
Convenience stores are a perfect example of small businesses that adorn every high street in the country, and they pay a whopping £5,000 a year in card payment fees, money they would dearly like to keep hold of as the cost of doing business starts to bite.
Alternatives are emerging en masse, with fintech acquirers like SaltPay and iZettle offering similar services to the incumbents but in a far more transparent fashion. If you are a B2B business, you need a B2B payments provider – find the best value option for your business and minimise unnecessary costs.
- Travelling or doing business abroad? Check your bank’s fees for international payments
Card fees for cross-border transactions are higher than fees for domestic transactions. This is ostensibly because these transactions are seen as riskier. However, they have been rising in recent years as banks seek to take advantage of the lack of regulation since Brexit to maximise their profits.
The good news is that not all card issuers pass these fees onto consumers. If you travel abroad often or have a European bank account, take a look into alternative options. Some banks offer specific cards with lower fees for frequent travellers, and others, such as Monzo, charge far cheaper fees on international transactions. Taking the time to identify alternative providers who charge lower fees can have a positive material impact on businesses and consumers alike.
- Contactless is King
Contactless payments are less expensive to process than chip and pin payments. Most customers now expect to be able to pay with contactless, and ensuring contactless payments are set up can save businesses hundreds in unnecessary fees.
Make sure your business is set up to accept these payments to improve efficiency, increase customer satisfaction, and, most importantly, save money on your transactions.
- Check what your card reader is providing for you
Compare what card readers will provide your business as well as how much they will cost you. By comparing and finding yourself the best machine, you will save yourself on transaction fees in the long term.
Card readers now do more than just allow businesses to accept cards. Innovative firms such as Saltpay allow companies to receive better data on how their customers are spending. Allowing businesses to make smarter business decisions and help improve their cash flow.
6.Consider alternatives to cards
There’s more to paying than cards and cash. Businesses are increasingly considering alternative methods of payment outside of traditional card transactions. The world of financial technology is continually advancing with new methods of process payments becoming available all the time.
For instance, open banking allows consumers to pay using a bank transfer, leading to faster settlement, at less cost. This helps cut out a lot of middlemen taking a chunk of each payment every time and helping the business to save money. It’s still some way off from being available at every till in the UK, but is starting to make strides online through leaders like Crezco and GoCardless, while Fintechs like PENG are looking to bring the technology to the high street.
By Luke Kosky
Luke Kosky is Head of Fintech Policy at the Coalition for a Digital Economy
