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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.

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