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Payment companies are withholding funds from struggling businesses


 Businesses who are already experiencing cash flow issues are having an even more difficult time

Businesses who are already experiencing cash flow issues are having an even more difficult time

Restaurants and retail stores are raising complaints about payment processing firms holding onto their money, according to The Times.

Payment companies already impose a transaction fee, causing more problems for stretched businesses as consumers increasingly opt for card and mobile wallet payments.

UKHospitality have not heard any cases from their members, but urge anyone affected to come forward. Kate Nicholls, the organisation’s CEO, told SmallBusiness.co.uk:

“With the bulk of hospitality businesses providing products for immediate consumption, there doesn’t seem to be any reason why merchant services should do this with businesses like cafés, pubs, restaurants or bars.

“If any hospitality businesses have experienced this, then we encourage them to contact us, even if they are not members of UKHospitality.”

The practice is more common in sectors with higher-priced items like holidays and furniture. In the run-up to Thomas Cook’s collapse, the firm’s payment processor lengthened the time it held onto customer money from two days to several weeks. The Times reported that the processor held onto millions of pounds.

> See also: Three ways to reduce chargebacks

Worldpay, First Data and Adyen are expected to review the risk profile of their relationships following Thomas Cook’s demise. The Financial Times says that acquirers are considering increasing their charges or demanding higher security deposits to reduce risk.

Payment processors generally hold onto funds to limit risk such as businesses closing accounts when they still owe money as well as chargebacks and fraud. These companies take responsibility for moving money between the merchant and the bank so it may be left to them to cover the cost if the merchant can’t pay up.

More difficulties for high street businesses

Amidst election campaigning, the British Retail Consortium (BRC) have called on politicians for the urgent reform of business rates and the apprenticeship levy.

The Times says that business rates bring in about £30bn a year but ‘effectively penalise companies that need a presence in town centre locations.’ On top of that, there are too many restrictions on the apprenticeship levy and what it can be spent on. The BRC warned that the levy ‘cannot support the development of higher-skilled, more productive retail jobs without significant reform.’

Have you been affected by payment processing firms withholding your funds? If you’d like to share your story, please email [email protected].

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The essential guide to managing small business cash flow



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