Credit card transactions go electronic, causing problems for small businesses

Some shops reject credit cards rather than take on expenses of electronic system

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By Esko Nurmi
     
      "Credit cards are still valid this year, but not in January", Jan Strang has been saying to his customers recently. Strang is the manager of a Helsinki used book store, which specialises in old maps.
      As of the beginning of the new year, the credit card service company Luottokunta is no longer processing receipts from mechanical credit card swipers.
      Jan Strang's shop, Antiikki-Kirja, is among the companies in which the proprietors are finding it difficult or impossible to justify the additional expense of the electronic payment system required by Luottokunta.
      "I calculated that the device and the new fees would bring additional annual costs of EUR 1,200. It would be about ten per cent of the turnover that credit card sales bring in", Strang calculates.
     
Strang says that he likes new technology as such, and he understands the aim of more security. However, because of the costs he has had to drop Visa and MasterCard out of his choice of payment options. This also applies to online payments.
      At Luottokunta, Veijo Laakso, the head of merchant services, is familiar with the problem. "We know that the fewer payments, the more difficult it is to justify the investment."
      Laakso will not speculate as to how many businesses will be giving up as customers of Luottokunta because of the costs. "It will probably be in the hundreds", ponders Simo Räihä, who is responsible for services at the Federation of Finnish Enterprises.
      He says that the costs of the card payment changes have been placed exclusively on the entrepreneurs. "Luottokunta might have taken some responsibility, too."
     
Both Laakso and Räihä have received protests about the shelving of the mechanical credit card swiper. The protests have nevertheless not been very numerous. "All of those who have complained have been of the open market stall variety", Laakso says.
      Antiquarian bookseller Strang sees himself as a "market stall merchant" too, as he sells old maps, graphics, and books at fairs and exhibitions. For instance, the Helsinki Book Fair is an important sales event for him.
     
Changing sales venues requires a mobile credit card reader, with more expensive technology than one using a land line. Mobile devices are not currently available for rent: each merchant is required to buy one. Strang reached his cost estimate of EUR 1,200 a year by splitting the price of the equipment over three years - the period of time in which electronics usually becomes obsolete and has to be replaced.
      The mobile device requires a separate mobile telephone subscription. Maintaining the software has to be paid for, and Luottokunta is charging a new annual fee of EUR 360 for remote sales. The additional costs comprise all of these.
      "Ten per cent is rather steep a price for merely receiving payment, considering that handling cash is free", he ponders. Even the old credit card commission is cheap for stall merchants, compared with the new technology.
      "Time has bypassed the card swipers. There is nothing to be done about that", says Laakso of Luottokunta. "Card technology has moved forward, and it requires electronic handling. It would not have been possible to postpone the change very much."
     
Jan Strang will still be able to use the old card swiper for customers using debit cards. This form of payment, which is comparable to paying in cash, is not changing - at least not yet.
      "At the beginning of the year, a transitional period will begin for the introduction of cards of the Single Euro Payment Area (SEPA), intended for the whole euro zone", says Timo Ylitalo, director at the Federation of Finnish Financial Services. Customers will get new cards to replace the old ones when they expire.
      "Debit cards will still exist for now. There is no set time when it will be given up - if ever."
     
Ylitalo says that there is no shortage of those who want to slow the process down. "Merchants in all of Europe have woken up to the prospect of the disappearance of national instruments of payment. Shops calculate that in certain situations, costs will increase."
      The distribution of liability of the manually submitted credit card payments changed more than a year ago. At that time, businesses were made liable for fraudulent payments which could have been prevented with an electronic smart card reader.
      With bank-issued debit cards, responsibilities remain unchanged. "Card swiper receipts are as valid as electronic payments for banks", Ylitalo says.
      However, in manual payment, a merchant needs to be careful, and to check the latest lists of cancelled cards printed on paper, in order to avoid possible problems with a customer.
     
Helsingin Sanomat / First published in print 31.12.2007


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ESKO NURMI / Helsingin Sanomat
esko.nurmi@hs.fi