Fuel sellers watching banks on new cards
July 13, 2009
By Siseko Njobeni
The merchant service fee that banks will charge for the use of payment cards to pay for fuel will be a key factor in swaying fuel service stations to accept the cards or not, say retailers.
Although the Minerals and Energy Department last week published regulations that paved the way for the use of payment cards, retailers are waiting to see how high merchant service charges by banks will be.
Payment cards include debit, credit, cheque, fleet and garage cards. Merchant service fees are an important source of revenue for banks, but high charges would eat into retailers' margins.
"We have regulated margins and unregulated expenses," Peter Noke, the South African Petroleum Retailers' Association national director, said on Friday.
Retailers wanted a merchant service fee of 0,82%, which was below the charges of between 3% and 5% for card payments, said Noke.
The 0,82% was the variable cost of cash that was based on a study that the government, retailers and banks had commissioned, he said.
"Accepting card payment should not cost more than what it costs to accept cash," Noke said.
The regulations may allay some fears: "The costs to a retailer arising from the acceptance of payment in the form of debt, credit and hybrid cards must not exceed the costs of cash as a form of payment determined by the Department of Minerals and Energy on an annual basis."
Noke said the total cost of accepting cash was made up of fixed and variable costs. The merchant service charge was part of the variable costs. Fixed costs included insurance and cash-in-transit contracts.
"These are costs associated with holding cash at the forecourts. And there will always be cash at service stations," he said.
Noke said it was difficult to ascertain how the banking industry would respond to the regulations. "Because of the competition law, they cannot sit around the table and discuss pricing. So the level at which they will set the merchant service charge will depend on the individual banks," he said.
Attempts to get comment from the Banking Association of SA, the body that represents all registered banks in SA, were not successful.
The introduction of the payment cards is meant to reduce the amount of cash that service stations keep on site because stations are considered vulnerable targets for robberies.
The department said payment cards had historically not been allowed in SA because of the high costs associated with some of the cards. The debit card system had, however, made it easier and cost-effective to use payment cards, the department said.
The use of payment cards would also make it convenient for international visitors during next year's Soccer World Cup to purchase fuel.
Noke said the introduction of card payments was overdue. "This has been in the pipeline for about three and-a-half years now. This has been a long time coming," he said.
The regulations take effect immediately, the department said. - I-Net Bridge
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