Fri, Oct 05, 2018 - Page 9 News List

The rise of a cashless Britain is sinking the nation’s poor

As banks and ATMs close, consumers are nudged toward card payments, but it is Visa or Mastercard that benefit the most

By Anna Tims  /  The Observer

Illustration: Mountain People

Last year, at the start of the summer, the last bank in the Dorset seaside resort of Lyme Regis closed. The only way for its 3,600 residents and thousands of tourists to get hold of their money was to join the lengthy line at the post office or via a single ATM, which regularly ran out of bank notes.

Those who needed an over-the-counter service had to make the 9.65km commute to the nearest bank, in Axminster.

Residents with no access to a car or online banking have been left stranded and even ice-cream sellers have been forced to invest in card-payment technology.

“It’s caused real hardship,” said Arthur Fordham, a spokesperson for the local ironmongers. “If you didn’t accept card payments, you faced going out of business because customers couldn’t get cash, but card payments are more expensive to process.”

A year on, the shop has agreed to host an ATM to get cash flowing through the town again and the lines to use it often stretch down the street.

Lyme Regis has become an involuntary forerunner of the cashless society. Nearly 3,000 bank branches have closed across the UK since 2015 and ATMs disappeared at a rate of 500 a month in the first half of this year, according to a survey by the consumer group Which? — a sixfold increase since November last year.

More than 130 communities, many of them in poor areas, now have no ATM and the 2.7 million Britons who rely entirely on cash are being increasingly shut out of essential services.

Cash is still the most popular form of payment in the UK, accounting for nearly half of all transactions.

However, few of those who prefer plastic realize we are all footing an invisible bill for the convenience. Credit and debit card payments cost traders on average three times as much as cash because they have to pay a service charge to the bank that processes the payment.

Part of that, the interchange fee, is passed to the card issuer and most of the rest, the scheme fee, goes to Visa or Mastercard.

The EU capped interchange fees in 2015 and, this year, banned traders from recouping the cost through a surcharge on card transactions.

However, Visa and Mastercard have diverted the savings into their coffers by quietly doubling their scheme fees. Businesses now pay nearly £1 billion (US$1.3 billion) a year more in these charges than in 2015 and small businesses, such as cafes and corner shops, are disproportionately hit.

“The costs that come with processing card payments stifle small firms across the country,” Federation of Small Businesses national chairman Mike Cherry said. “If the war on cash is successful and card providers end up with a monopoly over the payments market, scheme fees may rise even more. Now that small firms are prohibited from directly passing on the costs of processing cards, some have no choice but to raise prices.”

As Visa and Mastercard consolidate their grip on our purses, their profit margins have soared to more than 50 percent, much of it thanks to the fees levied on every card transaction across the world.

Small wonder then that Mastercard chief executive Ajay Banga has declared “my enemy is cash,” while Visa chief executive Al Kelly told an investor conference last year that “we are focused on putting cash out of business and getting more and more consumers into the payments market through more and more transactions on Visa cards.”

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