The uptake of tap-and-go purchases during the pandemic has made spending easier than ever, but small businesses say they’re taking a hit as a result.
Point-of-sale (POS) processing fees have become a topic of contention, and small businesses are calling on the government to do more to help them.
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POS processing fees are incurred by businesses when customers pay using in-store electronic terminals, such as by tap-and-go. These fees differ depending on the bank involved.
Small business owners say they currently have two options: absorb the POS processing fee, or risk angering customers by imposing a surcharge.
“I know some other businesses at the moment are looking at, or have started, charging customers,” restaurant owner Manny Notaras said.
“They’re getting dirty looks and some are getting abused.
“The costs are going up, inflation is going up, and I know from my end I’m $2000 every month out of my pocket.”
Customers say they don’t want to take on the cost, either.
“I try not to go back to businesses that charge a surcharge,” one person said, while another complained that banks “already have your money and then they’re charging you to use it”.
Many consumers have so far been able to escape a higher surcharge by using eftpos debit instead of credit.
Most debit cards are dual network, noticeable for having a Visa or MasterCard logo on the front but an eftpos logo on the back.
When customers insert or swipe on a payment terminal, they can opt for the cheaper eftpos network.
But when a customer taps their card, the system automatically funnels the payment through the more expensive international networks.
This is something the Reserve Bank wants to fix, with an initiative called Least Cost Routing whereby merchants are always given the option to use the most affordable payment option.
Determined by the banks
The availability of Least Cost Routing is determined by the banks.
RBA payments boss Ellis Connolly says the take-up has been “disappointingly slow”, revealing last week National Australia Bank (NAB) has been the slowest by far.
“The banks needs to really get behind this and make it simple for businesses to adopt and simple to understand,” Council of Small Business Organisations chair Matthew Addison said.
“If we can keep the costs of doing business down, that means the business doesn’t have to increase their prices.”
The small business community wants the federal government to mandate the banks and payment providers to make least-cost routing available.
“We’re in a really tough economic environment for small businesses,” Addison said.
“All the costs are going up and here is a way that is no cost to the government, no cost to the budget, to enforce a system that will save costs to small businesses.”
The banking sector argues fees for debit transactions have come down over the past decade and that least-cost routing isn’t ideal for everyone.
“CBA is committed to achieving 100 per cent availability on our terminal fleet,” the Commonwealth Bank said.
Westpac said: “enabling Least Cost Routing for merchants is a priority.”
NAB said: We’ve adopted an ‘opt-in’ approach to Least Cost Routing.”
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