The Retailer Summer Edition 2022

SUMMER 202 2

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UK retailers are now shouldering more than half a billion in estimated fee increases since regulation. Given that payments can be a business’ sec ond-largest cost after labour, merchants, regulators, and consumers can’t afford to look away from the payments market when inflation hits.” – Callum Godwin, Chief Economist, CMSPI”

Costs Beyond Fees: Inflation and Lost Sales Not only can growing prices inflate card fees, but Average Transaction Values can also be a predictor of falsely-declined transactions. As fixed rulesets designed to prevent fraud are more likely to reject higher-value payments, rising prices can put the experience of loyal customers on the line, too. In the world’s third-largest ecommerce market , these errors can be make-or-break for retailers - especially as ‘false declines’ are already estimated to be 5x more prevalent online than in-store. CMSPI estimates that fewer than than 50% of customers will retry a transaction following a false decline - a reality which makes it crucial that approval rates and fraud are not left out of the equation by businesses seeking to relieve pressure from their card fees. Value is Being Left on The Table As supply chain disruption and reports of a looming recession mount , UK merchants are looking to take payments into their own hands. However, many still believe that ‘pass-through’ fees such as interchange and scheme fees are non-negotiable, and that there’s little they can do about falsely declined transactions. But that’s not the case; in CMSPI’s experience, significant variation in acquirer pass-through of fees – aris ing from system capabilities, FX fluctuations, regular mischarges, and more – can produce unmissable opportunities for merchants with the expertise to audit effectively. More than that, the payments-savvy are working directly with every party in their transaction flow to ensure their fraud rules aren’t turning away good customers at a time when every lost sale could put a lifelong customer on the line. Card fees may be a long-standing frustration, but inflation makes them one that can’t be left to spiral for UK merchants in 2022.

Martha Southall msouthall@cmspi.com

CMSPI is an independent, data-powered, global consultancy that advises clients on improving the productivity of their payment arrangements by reducing costs, increasing sales and implementing innovative solutions.