Prospa is now open on Saturdays. Call our team between 10am & 4pm to discuss your loan.

Home » Blog » Should You Charge Customers A Tap-and-go Fee?

Should you charge customers a tap-and-go fee?

Australian consumers are leading the world when it comes to embracing tap-and-go payment technology.

But with fees running around four times higher than EFTPOS, you should understand the pros and cons before passing those fees on to your customers.

PRO: No margin for error

Tap-and-go payments currently charge merchant fees of 0.55% instead of 0.15% for swipe or PIN purchases. And while $0.40 difference per $100 transaction may not sound like much, costs can quickly add up.

For businesses with high turnover and low profit margins, it may be worth adding the fee to your product or service, requiring a minimum spend in order to waive the fee, or asking customers to pay by EFTPOS instead of tapping.

Remember you will need appropriate signage informing customers of any additional charge.

CON: The law

In September 2016, the Australian Competition and Consumer Commission extended its ban on charging excessive payment processing fees to small businesses. This means you can only charge customers the exact cost of the transaction, or face fines and potential legal action.

The ban extends to averaging out the costs across transactions – you’ll have to charge the lowest processing fee, or not at all. Banks are due to lower fees from April 2018 and may face ongoing pressure from regulators to keep lowering them, so you’ll have to stay across the costs or you could find yourself in trouble.

PRO: Business drivers

Research shows that nine in 10 Australian consumers prefer to shop small and local.

Peter Strong, CEO of the Council of Small Business Australia, believes that for most customers, the benefits of shopping local outweigh the burdens of a surcharge.

“In the main, customers go to shops for the quality, for the convenience,” he told the ABC. “They like the staff, they like the owner and another five or 10 cents isn’t going to worry them too much.”

CON: Bad reputation

Conversely, the digital revolution has made consumers more empowered than ever. If they don’t agree with your practice, you risk receiving bad reviews online or through word-of-mouth, as well as customers choosing to take their business elsewhere.

Put it this way: is your reputation really worth less than 40 cents in $100? The better way to go may be to factor into your pricing model an average fee for cost of installing debit and credit card payment terminals and transaction fees (especially with the introduction of services like Apple Pay only set to increase demand for tap-and-go services).

You could turn a negative into a positive by using the relative ease of the tap transaction to up-sell or build customer rapport.

Interested in other ideas for managing your finances? Talk to the small business experts at Prospa on 1300 882 867 or apply online for one of our small business loans.

The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

Keep reading

Restarting your back to business momentum

14 July 2020 | 4 min read

The COVID-19 shutdown took the wind out of the sails of many businesses. As Australia reopens, how can you ensure cash flow issues don’t keep you in the doldrums?

View more

Business finance: Last century lending vs today

11 February 2020 | 1 min read

More and more small businesses are ditching the old way of borrowing. Here’s why and what’s changed about business finance this century.

View more

How to improve your credit score

22 January 2020 | 4 min read

A poor credit score can be a handbrake on your business, limiting your access to finance or making it more expensive. Here’s some tips on how to improve your credit score.

View more

Subscribe to the Prospa Blog

Be inspired! Sign up to Prospa’s newsletter to receive tips, tools and small business success stories straight to your inbox.