Great to see mainstream media shine a light on this story about the soft of tap and go:
How the rise of ‘tap and go’ payments is hurting small businesses
Published: 08/12/2021Updated: Wednesday, 8 December 2021 3:04 PM AEDT
The rise of “tap and go” has seen grocery and fuel sellers slugged with higher transaction costs they can no longer absorb, a small business summit has been told.
Consumers don’t know that buying a coffee with a mobile phone might be making it harder for their favourite cafe or servo to remain in business because of steep transaction costs.“Transaction costs are accelerating more than any other,” Mark McKenzie, chief executive of the Australasian Convenience and Petroleum Marketers Association said on Wednesday.
Merchants’ fee costs have become an essential service, on a par with electricity bills in their impact on a business, as leaps in technology run ahead of legacy banking systems, he told the Council of Small Business Organisations Australia (COSBOA) payments summit.
Ben Kearney, head of the Australian Lottery and Newsagents Association, said there had been a massive increase in contactless payments, particularly during the pandemic.
“It has become an enormous issue for our members because of cost,” he said. He said a $10 lottery ticket brings a $1 commission but then a 10 cent transaction fee would erase 10 per cent of that commission.Payments expert Robbie MacDiarmid said $67 million per month in excessive fees was being paid by small businesses due to routing of payments.
COSBOA members want every transaction to be processed on a “least cost route”, including from digital wallets and phones, despite legacy issues for banks.
However, head of payments policy at the Reserve Bank of Australia Tony Richards said small merchants have low transaction costs by international standards. “Payment costs in Australia are much lower than in the United States,” he said. Dr Richards was not aware of any market where least cost routing was compulsory but he acknowledged treatment of payments made with digital wallets needed work.
He said least cost routing in mobile payments was not common and it would involve retrofitting payment systems and overriding consumer choice. ‘In some cases they’re just trying desperately to keep their head above water’ But Mr McKenzie says merchants are the customer of the service yet the supplier is making the decision about how they get that service, and that is innately wrong.
Meanwhile, COSBOA chief executive Alexi Boyd said business owners often didn’t know they were being slugged the maximum amount.
Nor would a consumer know that paying through a digital wallet like Apple Pay or Google Pay or doing a “tap and go” payment with their phone meant the transaction attracts fees were up to six times greater, she said.
I urge you to read the full story, and to share it on social media.
When I travel to regional centres, I like to read the local paper. I rarely carry cash, so when the newsagent doesn’t accept EFTPOS for small transactions, I move on or browse the paper there or at the local library.
I’ve long understood that the card transaction cost to the business is about 1.5% – or 3 cents if the cover price of the newspaper is $2.
I imagine that the cost of handling cash is roughly equivalent to that, if you consider the time taken to walk to the bank every day and the risk of the cash being pilfered (a motor mechanic told me exactly this a few years ago).
Am I right?
I also avoid surcharges, as I consider card fees a cost of doing business, just as handling cash also involves a cost to the business. Why should I pay the payment handling cost if I’m paying by card but not if I’m paying cash? Why don’t retailers increase prices so that they can absorb the bank card fees in the way they’ve always absorbed the cost of handling cash?
Michael,
Typically, EFTPOS in a retail business like a newsagency, costs between .75% and 1.3%.
The challenge with a newspaper is that many newsagents now only make 12.5%, or less. Newspapers are loss making once you cost in the space and labour.
With bank closures, the cost of cash today is often more than card transactions.
Personally, I hate surcharged imposed by businesses. In fact, so much so that I will not return to any business that does unless I absolutely have to. I especially hate surcharges where retailers have full control over their selling price – like in restaurants.
In a newsagency, we have less control over the price of what we sell. Cards, magazines, newspapers, lottery tickets – they are all price set by suppliers. I think this is why some newsagents have a surcharge. I think there is a better way to look at this, by modestly upping the price of items over which we do have control, having a tight roster and attracting new shoppers.
In other words, my approach to the cost of EFTPOS fees on a business is to lean into opportunities to improve profitability elsewhere to help cover the fees.