View from City Road: Common sense by the banks

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The Independent Online
Let's all agree that the banks are desperate to find new ways to fleece customers, and would charge pounds 25 for a letter giving the manager's name, if only they could get away with it.

But occasionally there are two sides to a story. The increases in credit card processing fees to retailers are a case in point.

The banks are using differential prices to persuade retailers to switch to electronic processing of card transactions, rather than fraud-prone paper methods, which are fundamentally a less efficient system.

But this has been complicated by a dispute with British Telecom over the cost of calls to the credit card centres from electronic terminals in shops, which one way or the other are passed on to the retailers. The banks want a further discount.

Today the banks hold preparatory talks ahead of a full-scale meeting with BT on 23 April, at which they will argue hard for a cut in the charges for calls to authorise credit card transactions.

Mervyn Gibson, director of UK interbank processing at Visa International, which is organising the meeting, said that charges had historically been too high.

BT had started to reduce them but the banks wanted to keep the issue under discussion because they planned to increase the proportion of transactions authorised by the card centres.

BT's charges for credit card authorisation calls vary, depending on the banks and retailers involved, but they are believed to range up to 8p per call.

Some of the more recent deals negotiated by banks have brought this down to 4p, which is surely justified by the increasing volume.

Last year about 16 per cent of the 700 million plastic card transactions in the UK had to be authorised. The retailer calls the card issuer to check both that the card is valid and that there is enough credit to pay for the goods.

Banks believe this is one of the most efficient ways to stem card fraud, which cost pounds 165m last year.

Barclays negotiated reduced charges with BT last year. As a result, retailers that use its card- processing facilities are now offered free authorisation calls if they use electronic terminals to process their transactions. The electronic terminals cost pounds 35 a month, but there are no additional telephone call charges.

Barclays is now trying to persuade its smaller retailing customers to switch to electronic processing by imposing charge increases of up to 8 per cent on those that continue to use the paper-based voucher system.

Many and devious are the ways the banks are trying to rack up charges without seeming to. But this one seems no more than common sense pricing policy.