You Pay more while Banks Profiteer in a Cashless Society…that’s the Convenience*
By Holly Black
The No 505 bus from King’s Lynn town centre to Spalding is about to drive off. I wave at the driver. She stops, and the doors slide open with a ‘pssht’.
‘Thank you for not driving off without me,’ I say and then ask for a ticket.
A day pass is £3. I root around in my purse, pull out my debit card and hand it over.
She looks me in the eye, then cackles:
‘You’re from London aren’t you? You can’t pay by card on a bus in King’s Lynn.’
It’s not the first time I’ve heard this today. This seaside market town may be less than 100 miles from the capital, it may be ‘the hub of West Norfolk’ as the town website boasts, it may be bustling and home to 45,000 people — but here, unlike in London, cash is king.
Try to pay by debit or credit card and you’ll routinely be sent packing to the nearest ATM, asked to spend more or pay a fee.
Banks are desperate to get us all to go digital. This week, the chairman of the British Bankers’ Association warned how hundreds more branches would shut because everyone was embracing new technology.
Speak to any of the big names and they seem convinced that every person in the country is routinely transferring money via their mobile phone, and using contactless technology (where you wave your debit card in front of a machine and money is automatically docked from your account). They think no one ever needs to carry cash again.
In London, you can use a debit card for most transactions. Almost every shop seems to have contactless payment machines.
Visa now has 300,000 across the country, and processed 111 million transactions in the past year. And if you can’t use contactless, then you can always revert to good old chip and pin, or — in some cases — use a programme on your mobile phone called an app.
These enable you to hail a cab, pay for car parking and make in-store purchases at the touch of a button.
Last year, £3 in every £4 spent was on a credit or debit card. There were 10.7 billion card transactions in the UK, but there is no record of how many cash transactions there were.
All this technology is designed to make paying for things even quicker. It’s supposed to make life more convenient for you and me.
But is there more to it than this? The small independent retailers of King’s Lynn certainly suspect there is.
A sunny Wednesday lunchtime, and its High Street is bustling with shoppers. There are more than 300 retailers around the Vancouver Quarter shopping district. There are all the major names, including HMV and Marks & Spencer — and all these stores have chip and pin. Just off this main shopping drag is Norfolk Street, home to many independent traders.
The road is lined with butchers, bakers, cafes and hairdressers. But it doesn’t take long to notice that hanging in many of the store front windows are printed signs warning ‘Cash only’ and ‘No cards accepted’. There is no cash machine I can find on Norfolk Street, so if you’ve only got cards on you, these shops could be off-limits.
Walkers News doesn’t have a sign in its window, so I pop in. I pick up a newspaper, a magazine and a birthday card and head to the till.
The owner stands behind the counter of the dimly lit shop talking quietly with a colleague. He runs up the total and asks for £4.20.
I pull my debit card from my purse. He spots it and sighs, then rummages beneath the counter.
He comes back up with a chip and pin device. It doesn’t seem to get used very often.
‘I need to charge you 30p to pay with a card I’m afraid. It’s what the card company charges me,’ he says apologetically.
‘Most of my sales are very low-value and my profit margin is so small that I would be making a loss if I covered the cost of the card payment.’
As well as the flat rate for debit card purchases, he has to pay 0.75 per cent for credit card transactions. So if someone spends £10 he pays 7.5p. It doesn’t sound a lot, but it can quickly add up. It’s part of the reason why some small shops ask for a minimum spend of £5 or £10 if you want to pay by card — quite simply, they’ll lose money if they accept anything less. Paying 30p for my purchase is like adding another 7 per cent to my bill — so I pay by cash.
In another nearby newsagent I pick up two bottles of water and a bottle of Coca-Cola.
The sales assistant asks for £2.98. When I ask to pay by card, he says he’s sorry, too.
‘We used to have a chip and pin machine, but it broke. We never got it fixed.’
It turns out the shop doesn’t have superfast broadband — few do round here — it’s just another expense.
As a result, it’s always very slow to take payment by card, as the terminals ideally needs to be connected to the web.
I understand. We all know how incredibly frustrating it is when the chip and pin device takes an eternity to connect.
He’s now thinking about getting broadband, though, and installing another device so that customers can pay quicker.
The downside is it’s going to cost them money for the terminal and the internet connection, and then more every time someone makes a transaction. It’ll be another drain on profits. Next stop is the Lynn Museum — ‘West Norfolk’s greatest treasure’, the sign outside reads.
Through the automatic glass door the entrance room is hot and empty. There’s a small souvenir shop area to the left and a reception desk, behind which sits a kindly-looking woman. Admission to the museum is £3.95. I get out my debit card and ask:
‘Do you have contactless payment?’
She looks at me sympathetically. ‘You put your card in here,’ she says pointing to the card slot in the chip and pin device.
‘But can I just wave my card at the machine and pay that way?’ I persist.
She thinks I’ve lost the plot. ‘Oh no. We don’t have anything like that.’
But having just been given an eye-opener about how much each card transaction costs small organisations like this — and I can imagine that for a small town museum finances are tight — I decide not to pay by card.
There seems little doubt that we’re all carrying a lot less cash. According to a recent survey by financial company Think Money, one in five people carry £5 or less.
Last year, UK card spending topped half a trillion for the first time. Whether or not to accept cards is a major headache for small businesses.
If they accept them, there is the huge cost of the fees and rental charges they must pay companies such as Mastercard, Visa and American Express for equipment and transaction costs. (Part of the reason so many businesses refuse to take American Express is because they claim the fees are too high.)
Renting a single contactless payment terminal from Barclaycard costs a shop owner from £15 per month, as well as 1.5 per cent of every transaction.
These costs can be very hard to cope with for businesses which rely on selling lots of small-value items where profit margins are tight.
They can decide on a minimum spend for customers paying by card, or charge a fee for low-value transactions — but this can be off-putting for customers.
Equally, if they don’t have a card machine, this can be an even greater deterrent.
Small firms regularly describe the pressure they feel under to accept cards. If you listen to the banks, they would have us think that cash as a means of payment is dead. And maybe in London it is.
Website and mobile-phone app Uber will order you a minicab and let you pay for it; you can do the same for a black cab with an app called Hailo.
Parkmobile will allow you to pay to park without having to use a machine. Paypal will let you pay for a coffee or your lunch through your mobile phone.
Not only is paying by card quicker and more convenient, it’s psychologically preferable.
Research has shown that by paying on cards, you don’t feel like you’re actually spending money. That is good for businesses, as it makes us spend more.
Meanwhile, the banks clean up. Moving us all to online and digital payments can be much cheaper for them.
Depositing cash every week into the bank costs businesses money — unlike a normal current account, most business bank accounts charge a monthly fee. And there are extra charges to make deposits and withdrawals. But, time-consuming as this is, it can work out much cheaper for a small firm.
There are even some who claim banks are trying to strong-arm businesses into going digital by hiking their fees.
And many believe that forcing everyone to go digital is just another means of allowing banks to shut local branches.
Paying in and taking out money from your account does not make banks money — sales do.
Bank branches are expensive to run: there are rent, bills and staffing costs.
As I fumble for change to buy a carrot cake in a bakery by the bus station in King’s Lynn, the sales assistant tells me they haven’t got any plans to implement card payments at the moment. In Abbey Cars taxi office, the operator says there’s just no need for it. After several hours wandering around King’s Lynn it is time for lunch — but few of the cafes seem to take cards.
Finally, I find one which does, The Filling Station.
The furniture is mismatched, there are multi-coloured chandeliers and wood-effect lino flooring. Customers nurse tea and homemade cakes and the staff seem to know them all by name.
I order a jacket potato and a drink, then sit and watch how people are paying. Everyone is handing over cash.
After devouring my meal, I ask for the bill and cagily pass across my debit card. Though I’ve only spent £12.30, and I now feel a little bit guilty about paying with plastic, it’s taken without a fuss. What a relief.
I head back to the car. Then I realise the ticket machines in the car park only accept coins — and I’m all out.