A significant increase in retailers paying with corporate credit cards is eating into wholesaler margins due to higher fees, according to industry experts.
In the aftermath of the pandemic, where credit card transactions dropped by 39% in a year, providers are understood to have increased efforts to sell cards aimed at retailers.
This has resulted in a much higher number of transactions occurring on cards with higher interchange fees.
One major wholesaler told The Grocer: “Just one year ago the average interchange fee was 0.75%, and it was less than that beforehand. But now our average credit card interchange fee is around 1%, and some cards are charging 2%.
“The wholesaler is the only one that is paying the bill for everyone else’s benefit. We have no input on this, which seems very wrong.”
On products such as tobacco, where margin is typically as low as 0.8%, transactions using these cards can be loss making.
The issue has led Time Wholesale Services to ban all cards with an interchange fee higher than 1.5% in the depot.
“The problem is that we’ve seen an increase in the usage of these cards, and a lot of retailers are saying to us that they’ve been approached,” said Time MD Sony Bihal.
“They’re hitting the independents because they know it’s a lucrative market and the cards are going to get used in cash & carries.”
Gregg Morris, founder of card payment processing company Payment Pros, who works with wholesalers including JW Filshill and Time, said: “A range of new companies have flooded the market with corporate cards.
“This wasn’t an issue four or five years ago because only 5% of the total volume of merchant processors were on these cards. But now it’s up to 15%.”
The Payment Systems Regulator is currently conducting a market review of payment processing fees. However, the body is expected to provide no remedies before the fourth quarter of 2024, leaving wholesalers with few options.
FWD head of engagement Lyndsey Cambridge said: “It’s worrying that wholesalers are being put in this position, at a time when the cost of doing business is soaring.
“The Payment Systems Regulator needs to put this issue higher up its agenda with an urgent review.”
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