Now it appears that the banks are due to make even more money from the credit payment processing business. As if they weren’t making enough from individual merchant accounts, now the Royal Bank of Scotland (RBS) are selling their extremely lucrative WorldPay.
What is WorldPay?
WorldPay are among the ten largest merchant credit card services providers in the US at the moment, so you can imagine that their business is very big business. They offer their services to all business, including small to medium sized businesses, and they have an impressive record of achievement.
Why are RBS selling?
Well the exact reason why the RBS are selling such a lucrative business is not fully known, but perhaps they foresee problems in the merchant fees issue. As you are probably aware from reading this blog, merchant fees have been a contentious issue lately, ever since organisations such as the British Retail Consortium (BRC) have published reports suggesting that banks were making too much profit off the back of retailers and all merchants that use their payment processing services.
The BRC worked out that in 2009 the biggest cost for payment collections was the merchant service charge, an often very vague fee that banks charge their merchants in order to carry out their cash, debit and credit card processing needs. In fact, according to those who participated in the BRC’s report, out of a total cost of £588 million associated with payments collection 81.2% is being paid directly to the banks for their merchant service charge.
Jumping Ship
There may well be an overhaul of these charges in the near future, particularly since there is newer technology on the way to improve the world of credit payment processing. The Chip and PIN machines may well soon become a thing of the past now that contactless technology has been introduced and is spreading, and there is also news of the exciting new “Square” technology moving forward fast from the US. This technology will force the banks and others to rethink their merchant service fees and perhaps lower.
What happens when the banks lower their fees is that they need to find that money elsewhere or they will face financial difficulty elsewhere. If shareholder don’t get the dividends they expect, and profits aren’t continuously going up then there will be more problems. Perhaps RBS have the right idea in selling their £2.5 billion payment processing company. They won’t have a shortage of buyers for the business and they are sure to sell quickly considering that WorldPay operates in more than 40 countries worldwide, providing credit payment processing to millions of individuals.
RBS may soon announce the winner of their prized possession, and it may even be before they announce their earnings for the year at the beginning of August. Keep your eyes on the blog for more information about Britain’s biggest government owned bank and what it’s up to.