Interchange again – and no apologies for returning to a well worn theme – what will be the affect of the new interchange caps coming into force? Douglas Blakey comments
There has been much comment that the new regulations will do little to benefit consumers; fee structure would change, new fees would be introduced and existing rewards programmes would be axed or at best, pared back.
The argument usually ended with the forecast that retailers will be able to take the savings direct to their bottom line, and not pass the benefit to consumers which was their argument to get interchange fees capped in the first place.
For the record, the counter argument is that the new interchange caps will is actually be good for the consumer as it brings the fee structures into the open as opposed to in effect retailers paying.
Early evidence comes to hand that the former argument may prevail. Capital One is reportedly to stop offering cashback to new customers and will remove or reduce its cashback offering for some existing customers from 1 June.
There is an argument that the credit card may actually be affected to a disproportionate degree compared to other card sectors: credit usage and margins have been eroded in the past few years these past few years plus credit interchange rates are significantly higher than other payment cards and so the reduction in revenue is likely to hit harder.
It will be of interest to note if Capital One is going out on a limb here or if it is just the start of a move towards watered down cardholder benefits.
Online spend highlighted by UKCA
For the first time the UK Cards Association has tracked the amount of online spending by card along with number of online transactions. Perhaps no great surprise but it was interesting to note that consumers spent twice as much on cards on average via the internet as they did in-store in January with the average transaction value for each standing at £96.10 and £46.53 respectively.
According to UKCA, 30% of the value of all spending on cards in January was via the internet, with £15.4bn of the £46.5bn total spent in this way.
Thirty per cent and rising seems a fair bet; cue time for some forecasts as to when we might reach a tipping point with online card spend overtaking spending in-store.