The use of cash is certainly not experiencing a massive comeback, but it turns out that the fees for terminals and card transactions are so high that companies do not want to “subsidize” banks or payment card issuers. At the same time, the effort to create alternative ways for mobile payment is also growing.
When the seller switches to paying by card, they must expect that you will pay a so-called transaction fee for each transaction. Namely the institution from which the payment terminal is rented, the bank that processes the transaction, and also the card issuer.
Fees, fees, fees
Many companies offer payment terminals, and you can register several packages at each of them. Typically, however, the fees are up to two percent, with the fact that you pay at least one crown for each transaction. Even if someone buys just one roll from you. If we add to that the monthly rental of the terminal in the order of several hundreds or a SIM card with a monthly data tariff (if the establishment is outside the reach of normal networks), we arrive at amounts that not everyone wants to pay.
Of course, most terminal issuers will waive the monthly fee if the value of monthly transactions exceeds a set limit (perhaps 50 or 100 thousand crowns), but this is logical. The terminal issuers will make even more money thanks to the transaction fees than for its rental.
Big chain stores can automatically include transaction fees in the final price of all products, and if people pay for them in cash, they have more money left over. However, for small traders, where “every penny” matters, the introduction of terminals may not always be economically advantageous.
The transaction fee consists of three parts:
1st part – Transaction processing fee – ACQ fee (Acquirer fee), i.e. fee to the payment terminal provider
2nd part – Issuing bank fee – IF (Interchange Fee), the bank you have on your payment card receives an IF fee when it is used in the terminal. According to EU regulation, the bank always has 0.2% from the transaction
3rd part – Fee to card companies – SF (Scheme Fee), charged by the card issuer (Visa or MasterCard), and consists of a percentage commission and a fixed amount
So, when you wonder why the store does not accept payment cards, or only after a certain amount (for example, 50 crowns), you will know why. But at a time when everyone has a smartphone in their pocket, it is directly offered to use alternative methods of payment, which would displace the one that goes to card issuers from the chain of fees. For example, the Czech bank Air Bank is currently inventing a new method of payment, while Unicredit, in turn, has bet on the tried-and-true AliPay, which mainly targets foreign tourists.
Payment between cash and card
Head of Air Bank Michal Strcula in an interview for SZ stated that the bank plans to introduce mobile payments on the principle of immediate payment this year. It is supposed to be a new solution that omits the fee for payment card issuers and the terminal operator from the transaction fee (see above). Theoretically, the bank can take an even bigger share of the fee than now, but due to the elimination of other parts (see above), the fees will be lower in the final. AirBank has not yet officially introduced the service, but we believe that it will be nothing more than the well-known instant payments using QR codes, which are widespread and popular in China, for example.
Jana Pokorná, spokesperson for Air Bank, answered our direct question: “By the end of the year, we want to bring a completely new method of payment to the banking market, which will allow merchants to receive payments even without a classic payment terminal. The goal is to bring merchants a technically simple way of accepting cashless payments, which will also be attractive to them in terms of price. Our new solution will also make paying more pleasant for the customers themselves, as it will increase the number of places where it will be possible to pay cashless.”
So we can probably expect a mobile application that will be used both for sending money and for receiving it. And at the speed of immediate payment. Smartphones are of course ready for this, the announced “attachment” will be necessary here for sending and receiving money using NFC technology. And you will find this in (almost) every smartphone. Or the application will use the camera in the mobile phone to scan the generated QR code. Air Bank adds that it wants to prepare a payment interface for the entire market as part of cooperation between banks, so that those who are clients of another bank will also use the future application.
Will it be a revolution?
The bank does not yet want to be more specific about the payment procedure, but we are guessing that it will be a variation on QR payments. Ten banking institutions in the Czech Republic accept them through their mobile applications. All you have to do is scan the QR code created on the basis of the CBA standard with your smartphone, and all fields will be pre-filled within the order in progress. It is then up to the user to agree and confirm with various verification methods (banking password, SMS password, fingerprint reader, etc.). In addition, you can easily generate a QR code directly on the official website websites of this open standard.
Paying via QR codes saves you rewriting the account number, amount and additional symbols, in which you can make a mistake at any time. However, you still have to approve the payment using one of the above methods, so it’s not a solution that competes with the speed of a “beep” at the terminal. QR payments can be immediate, but provided that the customer’s bank, i.e. the person who reads the QR code, supports it. There are only 13 out of 44 banks in the Czech Republic that support the sending and receiving of immediate, i.e. instant, payments (data valid for the end of 2022).
The solution from Air Bank should, according to the company, offer immediate mobile payment by attaching two devices (between the lines, this implies the use of NFC), which will be available throughout the market. As a result, the restriction of QR payments to supported banks will be removed, as well as the confirmation of payments, which can be lengthy with some banks. And that’s thanks to the mandatory rules of two-factor authentication, which came into effect for banking institutions in the EU on September 14, 2019.
If the bank manages to deal with both problems and adds lower fees on top of that, which will attract even the existing “opponents” of cards from the ranks of merchants to the service, mobile payment in the Czech Republic could become much more interesting and affordable. However, everything is just our estimates for now, Air Bank wants the service, or mobile application, to be officially presented to the public by the end of this year.
2023-07-29 16:39:00
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