The REAL cost of payments for the UK economy
Running a small or independent business in the UK is no easy task. From managing stock to maintaining a loyal customer base, these businesses already face a wide array of financial pressures. One cost that often flies under the radar but accumulates quickly is the fees for taking payments. With the growing use of card payments and digital platforms, businesses are paying more and more in transaction fees each year. But what if they didn’t have to?
For many small and independent businesses, payment processing fees represent a significant expense. Typically, businesses pay between 1.5% to 3% per transaction when using card payment providers such as Visa, Mastercard, or PayPal. These fees are charged per sale, and over the course of a year, they add up considerably.
Here’s a breakdown of how much businesses could be paying annually in payment processing fees based on their turnover:
The larger the business, the higher the costs—yet even smaller businesses can feel the pinch when you factor in the slim margins many operate on. For a business earning £100,000 a year, losing £3,000 in fees might mean a significant portion of their profits.
Enter open banking—a financial innovation designed to create more competition in the payment sector by allowing businesses to take direct payments from customers' bank accounts without involving card networks or other third parties. The beauty of open banking is its potential to drastically reduce or eliminate payment fees for businesses.
Open banking allows for secure and instant bank-to-bank transfers, cutting out intermediaries and their associated fees. This not only makes payments faster but significantly cheaper. In fact, some providers, like VibePay, offer fee-free payments for businesses, meaning more of a business’s revenue stays where it belongs: in their pocket.
By using fee-free payment platforms like VibePay, businesses could reinvest these savings back into growth, improve cash flow, or simply enjoy higher profit margins.
The savings extend far beyond individual businesses. According to the UK government, there are over 5.5 million small and medium-sized enterprises (SMEs), which make up 99% of all businesses in the UK. If each of these businesses could save thousands of pounds by eliminating payment fees, the overall economic impact would be enormous.
Let’s consider the numbers. If just 1 million businesses—a fraction of the UK’s SME sector—saved an average of £5,000 a year by switching to fee-free payments, this would result in a £5 billion boost to the UK economy. That’s money that could be reinvested into businesses, fueling growth, innovation, and job creation.
In fact, reinvesting these savings into business expansion or wages could have a profound impact on the job market. If a portion of that £5 billion were used to hire new employees at an average salary of £30,000, it could fund the creation of over 166,000 jobs. That’s 166,000 more people added to the UK workforce, helping to reduce unemployment and drive further economic growth.
By making payment fees a thing of the past, platforms like VibePay aren’t just helping individual businesses—they’re contributing to a stronger, more dynamic UK economy.
For small and independent businesses, cutting out the cost of payment processing isn’t just a short-term win; it’s a step towards long-term sustainability. As open banking becomes more widespread and platforms like VibePay gain traction, we could be looking at a future where businesses are no longer burdened by high transaction fees.
In today’s economic climate, where every pound counts, VibePay’s commitment to providing fee-free payments is a game-changer for businesses seeking to thrive in a competitive market.
