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Benefits
More and more customers now expect to pay for their purchases using a card when they are out shopping; or to pay for goods and services when they are online.
Think about your own experience and apply it to your business. When you go to the shops do you pay by cash, use a cheque or get out a card?
To help decide whether to take cards or not, here are some reasons why accepting cards could improve business:
- Customers increasingly expect to be able to pay by card.
- Payment at the time of the sale - no more “the cheque is in the post” - and the money is in the merchant’s bank account, typically, within four working days.
- Potential cost savings from holding less cash - saving on the security required to look after this money and trips to the bank to pay in takings.
- Improved cash flow with less reliance on financing such as using an overdraft or loan.
- Easier to make a sale, if the customer does not have enough cash on them at the time, they could use a card instead.
- Now that the UK has chip and PIN, it is usually quicker to accept card payments than a cheque.
- In most cases, where a customer uses a chip and PIN card in a shop, this will be a guaranteed payment for the merchant as the customer cannot claim they did not initiate the transaction.
- When a merchant takes a card payment, they know exactly how much the transaction will cost to process that can help when putting together a business plan.
An acquiring bank, who processes card transactions for a merchant, is always there to help a merchant when accepting a card payment. They can provide a range of card payment solutions that can be matched to a business’s growth aspirations.
Basic Products + Features
To start accepting cards, apart from having a Merchant Service Agreement with an acquiring bank, a merchant will need a terminal that connects to the acquiring bank to process a card transaction.
In the majority of cases, the terminal will provide an authorisation when a transaction is processed. This confirms, at that time, that the card used has not been reported as lost or stolen and that there are sufficient funds available in the cardholder’s account to make the purchase. However, this is not a guarantee that the transaction will, ultimately, be paid as it may be charged back due to a variety of reasons.
An acquiring bank will manage the accepted card payments; placing the money or funds, for, say, a card present transaction, into the merchant’s account, typically within four working days after the transaction has been processed. Click here for the timings of other transaction types.
A merchant can find out about the range of other services an acquiring bank can provide in the Products and Services section of this site.
APACS Statistics on spend
APACS collects statistics on the UK payments industry, which includes card payments, cash and cheques. To help a merchant decide if accepting cards could be good for their business, the following statistics on UK consumer spending shows the movement away from the traditional forms of payment, such as cash and cheques, towards card payments.
UK Consumer Spending
|
1996 |
2006 |
% Change |
Payment cards issued * |
66.6m |
142.8m |
+114% |
Amount spent on cards |
£87.4bn |
£320.8bn |
+267% |
Number of card transactions |
2,296m |
6,441m |
+181% |
Amount written on cheques |
£172bn |
£164bn |
-5% |
Automated Payments ** |
£101bn |
£272bn |
+169% |
Amount of Cash payments |
£235bn |
£274bn |
17% |
Number of Cash payments |
26,318m |
23,069m |
-12% |
* Credit, debit and charge cards used by personal customers
** Includes direct debits, direct credits, other automated credits, standing orders and the same-day CHAPS service.
As the statistics show, there has been a 181% increase in the number of card transactions in the UK since 1996 and a 12% fall in the number of cash payments made. This movement away from cash is even more important if you consider the 267% increase in the amount spent on cards versus only a 17% increase for cash payments (less than the increase in inflation over the ten year period).
The figure spent on cards equates to just under one third of total consumer spending in the UK, with the remaining £710bn being made up of cash, automated payments and cheques.
A number of High Street shops have stopped taking cheques in favour of cards and this is expected to accelerate their decline. The number of cheques being written to make a payment is predicted to decline a further 61% by 2016.
These trends in favour of card payments are predicted to continue with the total number of plastic card payments (including those used for UK consumer spending) increasing from 9.4bn to over 15.0bn (2006 – 2016).
The internet revolution is set to continue as UK consumers make increasing use of this remote sales channel to purchase goods and services. In the UK, 75% of adults now have access to the internet, with 53% of adults accessing it on a daily basis. In 2006, the volume and value of individuals’ card spending online grew by more than a third. It is predicted that by 2015, 25% of all personal credit card spending and 8% of debit card transactions will be made online.
Source: APACS : UK Payment Statistics 2007 and The Way We Pay 2007 : UK Plastic Cards
With new developments in the card industry coming soon, such as contactless cards that can be used for low value purchases of less than £10, the trend to using cards in place of cash or cheques is forecast to accelerate.
To gain a better understanding of the end–to–end process for a card transaction, see the next section on the card payment cycle.
