Introduction

Want to stop transactional fees from eating into your profits? In today’s retail landscape, retailers are discovering new ways to save money and maximise profits – starting with cutting out costly transaction fees.

One of the most substantial, yet often overlooked, expenses for retailers is interchange fees – the cost incurred for processing card payments. With credit and debit card transactions dominating the in-store retail space, these fees can eat into your profit margins, especially for high-volume or low-margin businesses.

In addition to interchange fees, merchants also encounter scheme fees. For those who may not be familiar, scheme fees are charges imposed by card payment networks such as American Express, Mastercard, and Visa for access to their valuable payment infrastructure. While these fees play a crucial role in enabling secure and efficient transactions, they can accumulate over time. When combined with interchange fees, these costs can significantly impact your profit margins.

Enter Pay by Bank, an in-store payment method that enables customers to make purchases directly from their bank accounts, bypassing traditional card networks and, importantly, the hefty interchange fees. For retailers, this is could be a game-changer. In this blog we will be exploring how Pay by Bank can help merchants minimise or eliminate interchange fees and enhance profitability.

Understanding interchange fees and scheme fees

Interchange fees are charges that merchants pay each time a customer uses a credit or debit card. These fees are paid to the card-issuing bank and typically represent a percentage of the transaction amount, plus a small, fixed fee. While these costs help support the infrastructure for secure and seamless payments, they can add up over time — particularly for high-volume or low-margin retailers.

In addition to interchange fees, merchants also encounter scheme fees, which are charges paid to card payment networks (such as Visa, Mastercard, and American Express) for the use of their infrastructure. These fees can vary depending on the payment method and transaction type, contributing to overall transaction costs and affecting your profit margins.

For example, if your business processes £50,000 in card transactions monthly, a 2% interchange fee alone could amount to £1,000 per month, with scheme fees adding to that total. Over the course of a year, this could mean a significant expense That’s £12,000 a year taken straight from your bottom line. But…with the right solutions, such as Pay by Bank, you have opportunities to reduce these costs and protect your profitability.

The Rise of Pay by Bank

With the increasing demand for more flexible, cost-effective, and secure payment options, Pay by Bank could be an alternative payment option for you to consider. The best part? You don’t need to overhaul your entire payment ecosystem to introduce it. Pay by Bank can be seamlessly integrated into your existing setup, making it a straightforward addition without disrupting your current processes. This allows you to offer customers more payment options while keeping your operations running smoothly.

Pay by Bank allows customers to pay directly from their bank accounts via mobile banking apps, bypassing the need for card networks entirely. This results in reduced transaction costs, enhanced security, and a streamlined payment process for both the customer and the merchant.

This simple, fast, and secure method can significantly reduce or eliminate interchange fees, freeing up more of your revenue for reinvestment and growth.

Benefits of Pay by Bank for retailers

The potential for interchange fee reduction isn’t the only benefit that Pay by Bank offers to merchants. Let’s break down the key advantages of integrating this solution in your in-store payments infrastructure.

Lower Transaction Costs

The most direct benefit of Pay by Bank for retailers is the dramatic reduction in transaction costs. Since the payment is facilitated directly from the customer’s bank account to the merchant’s account, it bypasses the card networks and their associated fees. Without the middleman of the card processor, merchants can avoid the typical 1.5%-3% interchange fees.

Improved Cash Flow with Faster Settlements

Unlike card payments, which can take up to several days to settle, Pay by Bank transactions are settled in real-time or near-real-time. This means merchants receive the funds almost immediately, improving cash flow and liquidity. For businesses that rely on consistent cash flow to pay suppliers, manage inventory, and cover operating costs, this faster settlement process can make a significant difference.

Enhanced Security and Reduced Fraud Risk

Pay by Bank transactions are authenticated through the customer’s bank, often requiring multi-factor authentication (MFA) such as biometric verification or secure PINs. This additional layer of security helps protect both the customer and the merchant from fraud, reducing chargebacks and the associated costs of fraudulent transactions.

Additionally, because the transaction is initiated directly from the customer’s bank, sensitive card details aren’t exchanged, further lowering the risk of data breaches and enhancing overall security.

Seamless Integration with Existing POS Systems

Integrating Pay by Bank with your existing point-of-sale systems is often a straightforward process. This means you can introduce the option for your customers to Pay by Bank without having to overhaul your entire system, making the transition smooth and cost-effective.

Improved Customer Experience

Consumers today expect more choices in how they pay and offering Pay by Bank as an option in-store enhances the customer experience. Customers can enjoy a frictionless, fast, and secure payment process without the need to carry physical cards. This is particularly appealing to tech-savvy shoppers who prefer to manage their payments directly through their banking apps. Providing more payment options also shows that your business is committed to embracing innovation and convenience, which can help build customer loyalty and trust.

Eco-Friendly and Sustainable Payment Option

In addition to cost savings and operational benefits, Pay by Bank aligns with growing consumer interest in sustainability. By reducing the need for plastic cards and paper receipts, you can promote your business as eco-friendly and appeal to environmentally conscious customers. This can further differentiate your brand in a competitive marketplace.