Small business has urged banks to absorb proposed changes to Eftpos charges or else face SMEs shopping around for a better deal, amid warning prices could rise under new plans scheduled to be introduced in October.
Under a proposal to be considered by banks today, the five cent interchange fee will no longer be paid by a consumer’s financial institution but instead be charged to the merchant’s financial institution.
Eftpos says the changes, which will apply for transactions of more than $15 but exclude transactions by charities, Medicare and in Woolworths and Coles, are necessary to help it stay competitive. It bills itself as the lowest-cost payment system.
The Australian Retailers Association and the Small Business Council of Australia say keeping Eftpos as a viable alternative to Visa and Mastercard is important, and are calling on banks to absorb any increased costs.
ARA head Russell Zimmerman banks have made a lot of money over the years, and should swallow the costs rather than passing them on to retailers, who could then pass the costs on to consumers.
Should the banks accept Eftpos’ proposal, Zimmerman urges retailers to put the hard word on their banks before the plan starts in seven weeks’ time.
“I think retailers need to negotiate with the banks, this is an opportunity to shop around and see where you can get your best prices,” he says.
Zimmerman adds that there are ways retailers can avoid the brunt of the changes, such as processing transactions below $15 and offering cash out with the purchases.
Zimmerman says the changes come about after the Reserve Bank drew attention to the need to support the inexpensive system.
“The important thing is, if there’s no new investment in Eftpos, Eftpos will lose ground to Visa and Mastercard,” Zimmerman says, pointing to the company’s moves to improve security, allow it to be used online, and looks into tap and go and mobile payments.
Council of Small Business of Australia executive director Peter Strong also calls on banks to “stop and look at whether they can absorb these costs themselves.”
“If these costs are passed on, it’ll be harder for small business, and if more businesses close down, then there are fewer customers for the banks,” Strong tells SmartCompany.
“So banks and small business are in this together.”
He says given the difficult economic conditions, most small- and medium-sized businesses will choose to increase prices across the board rather than absorb the new costs.
Ingrid Just, spokeswoman for Choice, tells SmartCompany that from a consumer perspective, it’s not yet clear whether the banks will pass on the cost to the retailers.
“Smaller retailers will be less likely to absorb the cost, but it’s too early to judge at this stage.”
“We do know it’s the cheapest card. Fifty percent of card transactions take place on Eftpos,” Just says.
“According to Eftpos, the changes are important to keep it a viable alternative to credit card, and it’s important there is an alternative to credit cards.”
“If the retailer did decide to pass on the fee, it’ll still most likely be cheaper than a credit card.”