Retailers count the cost of interchange

The European Retail Round Table has warmly welcomed the announcement of the European Commission that it is opening competition proceedings against Visa in relation to its multilateral interchange fees (MIF) for cross-border point of sale transactions. The lobby group, which represents 15 of Europe's largest retailers, is urging the Commission to take punitive action against the card scheme.

The ERRT's Paul Skeetan pursues the usual argument: "High card fees hit consumers by putting pressure on prices and by discouraging all retailers from accepting cards."

He also notes that IKEA pays some €90 million annually and Tesco pays about €128 million in fees to the banks for processing credit and debit cards – that’s more than €210m p.a., between these two firms alone.

This chimes with some figures given by Julian Niblett, head of cash for UK retailer Boots at a recent conference - as first reported by David Birch in his digital money blog.

According to Niblett, Boots banks £2.5 billion in cash every year at a cost of £1.5 million, whereas the £2 billion in card transactions passing through the books costs £14 million.

Why should it cost ten times as much to process frictionless, electronic payments than it does to mint and transport great bags of hard currency?

If the card schemes and the banks - and their political masters in Brussels - want to move to an efficient electronic system for cross-border payments, then it's only right that they should look at the differential pricing that applies to different forms of payment media. Interchange is an obvious place to start.