The Card Payments Industry

Payments used to be simple……..banks accepted and made these on behalf of customers with cash or cheque.  Banks had branches and all transactions were conducted through those branches.  Then, in the 1950’s along came Diners, Visa and Mastercard and consumer credit and plastic transactions evolved.  Skip forward 40 years and we had the internet and e-commerce and the rise of new payment methods, such as PayPal.  More recently there has been an explosion in payment devices and methods such as contactless, e-Wallets and mobile payments.

But the basics havn’t changed.  Its just that there are more payment options (cash, debit, credit, PayPal, wire transfer, etc) more payment devices (terminals, internet, smartphones, etc), more players (banks, processors, ISO’s, device manufacturers, payment gateways, etc) and changing business models (banks outsourcing infrastructure, card schemes accepting non-bank members, etc).

Alternative payment options are emerging and are more prominent in other parts of the world where cards have always been under-developed.  New technology is bedazzling, but in the UK, cards remain the dominant payment method and face to face terminals remain the dominant capture method (e-Commerce second but growing rapidly).  UK payment methods are well established, commoditised products and SME Merchants should be able to access card payment facilities at a low and ever decreasing cost.

But that is not always the case.  Existing suppliers (mainly banks) have a vested interest in maintaining their high legacy pricing and profit margins.  Cheap deals tend to be offered only to new customers whilst existing customers face regular upward re-pricing through new charges or just plain old higher prices.  The service is often made overly complicated to instill a sense of fear in merchants who may dare to consider switching suppliers.

The alternative to the banks is the ISO (independent sales organisation) suppliers.  But in the UK, they and their cheaper pricing are not yet well known.  Nor do most merchants realise that the same banks do their processing if they buy the service from an ISO (see Who is who in card processing)!!  In the US, ISO’s account for a far higher proportion of the payments market and are well known and favoured by merchants.  We see the UK moving rapidly in that direction in the next few years.

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