Finance

Bank fees cost SMEs billions… WorkChoice backtracking… Broadband: G9 forging ahead… We drop shares, pick up business… Better searches from Google… Amazon joins online music battle…

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Bank fees cost SMEs billion$

The reluctance of Australian SMEs to shop around and get the best deal from their bank helped banks reap a record $5.7 billion fee bonanza in 2006, despite an across-the-board drop in merchant services fees.

Reserve Bank figures released yesterday show banks earned a total $9.7 billion from fees in 2006, with business fees increasing 3% to $5.7 billion and consumer fees increasing 10.1% to just over $4 billion. Business loan fees were the single biggest cost for business at just over $1.6 billion, followed by merchant service fees at $1.48 billion.

Significantly, however, the average merchant service fee – the charge paid by a business for each customer credit card purchase – has fallen from 1.4% to 0.85% of each transaction.

This could represent an even bigger price drop for SMEs, many of whom were paying merchant service fees of 3% to 4% until recently, according to Ian Rogers, the editor of independent banking industry newsletter The Sheet.

Rogers says the message out of these figures is that businesses need to shop around and get the best deal they can from their bank. “If you’re still paying a 2% to 3% merchant service fee, you’re really losing out. If you call around you should be able to get around 1% – and chances are if you ring up your current bank and tell them you’re getting a better deal they will immediately match that price.”

The drop in merchant service fees is a result of changes to the payments regulatory framework introduced by the Reserve Bank and fierce competition between banks for merchant business.

Council of Small Business Organisations of Australia chief executive Tony Steven says SMEs are prevented from taking full advantage of competition between banks because of the massive administrative effort required to change banks.

The onerous conditions that are imposed on SMEs by banks for any transaction, be it to apply for online banking or a loan, are time consuming, expensive and frustrating, Steven says.

“Small business definitely pays a price for that – it’s not so much about what the banks can offer, but the process of going from one bank to another is so onerous that people don’t want to do it,” he says.

Se also our feature Is your bank a bastard? and our checklist in Managing finances in the Growth Resources section.

– Mike Preston

 

WorkChoices backtracking

First it was the introduction of the “fairness test” for AWAs, now it’s dropping the WorkChoices name. The Howard Government is backtracking as fast as it can on industrial relations.

Workers at the Government’s former WorkChoices call centre have been told they now work for the “workplace infoline.” Yesterday Minister Joe Hockey described the name of the policy “WorkChoices” a brand. “If the name is on the nose, or if the term is on the nose, then that’s up to the Australian people to form that opinion,” he said.

It’s a sign that his PR campaign has failed. But WorkChoices is not just a brand, it’s a policy. Is the Liberal Party forgetting how popular the policy has been with business? What’s next, re-introducing unfair dismissal rights for employees of small business?

The fairness test is causing all sorts of uncertainty. The Australian Financial Review reports that the Queensland Retail Traders and Shopkeepers Association says it has members in limbo with collective agreements in negotiation. Minister Joe Hockey has promised to consult on the fairness test and release it by the end of May.

Business groups have demanded that the laws bringing in the test be passed by 21 June or postpone Parliament’s winter recess to get the law passed. It’s the least they can do.

– Jacqui Walker

 

G9 forging ahead as broadband battle rages

The G9 consortium of telecommunications companies is just weeks away from submitting its fibre to the node broadband pricing proposal to the ACCC for approval.

While Telstra has engaged in an unprecedented campaign of spin and personal attacks in an attempt to gain approval for its broadband plan, the G9 group has been quietly dealing with the Federal Government and the ACCC in an attempt to get its rival plan off the ground.

A spokeswoman for Optus, the largest of the G9 telcos, says the group is “continuing to work on its special access undertaking for the ACCC, which we’ll be lodging in the next couple of weeks”.

The draft special access undertaking lodged by the G9 with the ACCC in late April indicated it would price wholesale access for high speed broadband services at $45. Telstra has refused to reveal details of the price it would charge for access to its network, but there has been speculation it is seeking approval to between $60 and $80.

Meanwhile, the Australian Competition Tribunal yesterday upheld an ACCC ruling that Telstra was charging rivals too much for using its copper phone lines to deliver broadband services.

ACCC chairman Graeme Samuel told The Australian Financial Review that “this makes the need for Telstra to release its fibre to the node costing for public examination even more pressing”.

And the OECD has hit back at recent criticism of its finding that Australia lags behind much of the developed world in its broadband services. An OECD spokesman told The Australian Financial Review that the findings of a rival report were “highly dubious” and “likely the result of computational error and/or flawed methodology”.

– Mike Preston

 

Aussies opt out of sharemarket to buy business

Australian’s are dropping out of the sharemarket to buy or support their own businesses and pay off debt, according to a new report by the Australian Stock Exchange.

The 2006 Australian Share Ownership Study found that the proportion of Australians who hold shares either directly, through managed funds or self-managed superannuation has dropped from 55% in 2004 to 46% in 2006. Since 2002, however, the proportion of people with money in superannuation jumped from 67% to 74%.

Qualitative research conducted for the study found buying a new business or putting additional funds into an existing business was a key reason given by people who sold out of the stock exchange.

– Mike Preston

 

Google to integrate search functions

Google has announced that searches for images, maps, books, video, and news are now integrated.

“Over several years, with the help of more than 100 people, we’ve built the infrastructure, search algorithms, and presentation mechanisms to provide what we see as just the first step in the evolution toward universal search. Today, we’re making that first step available on google.com by launching the new architecture and using it to blend content from images, maps, books, video, and news into our web results,” says the official Google blog.

For consumers this is great news, because it makes for simpler searching the vast amounts of information available into one simple set of search results. You will find relevant results that you may never have seen because they come from a surprising source. For businesses trying to get noticed it is more complicated.

– Jacqui Walker

 

Amazon prepares to take on iTunes in a DRM-free music battle

Amazon will launch a digital rights management (DRM)-free mp3 format music store later this year, with EMI’s entire digital repertoire and songs from 12,000 other record labels, although the other major labels who haven’t as yet decided to take the DRM-free plunge won’t be represented, reports ITWire.

Reports online suggest that Warner and Universal are testing DRM-free tracks to gauge customer response, although their official position is that they still support DRM, as does Sony.

Without digital rights management, the music can be played on any device that plays mp3 files, which includes PCs, Macs, iPods, Zunes and Zens, and that you can burn the songs to CDs for personal use, with no burn limit restrictions noted.

– Jacqui Walker

 

Economy round-up

Last night’s New Zealand budget had plenty of good news for Kiwi business, with the corporate tax rate cut from 33c to match Australia’s 30c rate and a new R&D incentive more than twice as generous as that available in Australia.

At 1pm the S&P/ASX 200 has dropped 0.6% to be trading at 6324.9 and the Australian dollar is trading at US82.22c, down on yesterday’s US82.54c close.

– Mike Preston

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