Card fees still a headache as tap-and-go changes wait until 2019

Emma Koehn
13 December 2018
The Age
The small business ombudsman says it is taking too long for the banks to move to “least cost” routing to lower the amount operators pay when processing tap-and-go debit purchases.
The House of Representatives economics committee recommended in March that the big banks revise their systems so that tap-and-go payments made on debit cards were not automatically processed as credit cards, which costs small businesses more to process.
Small business ombudsman Kate Carnell has hit out at the fact that these changes will not be complete until at least the middle of next year.
“It’s unacceptable that the banks promised to implement this year and haven’t. They’ll say they have other things on their minds, but I reckon the reason they haven’t is they’re making a quid out of it,” Ms Carnell said.
Under the new model merchants will be able to control whether debit tap-and-gos are processed as debit or credit payments.
Westpac confirmed it had started trialling a least-cost model which would be available in the first half of 2019, while Commonwealth Bank said it was on a similar timeline and is on track to offer this by mid next year.
National Australia Bank has started rolling out the offer and more than 2000 of its terminals let business owners choose how tap-and-go debits get processed. More will get access to this in 2019.
ANZ said it was “working towards” providing business customers with the option in 2019.
Tap-and-go payments have been a hot topic in 2018 as retailers report being charged thousands in fees as customers move to card-only transactions.
Processing a debit card transaction typically costs around 0.25 per cent of the transaction value, but debit cards using tap-and-go can currently cost the same as a credit card payment, of up to 0.6 per cent. Smaller operators are often slugged higher fees than big retailers.
Melbourne small business Fitzroy bakery and cafe Dench Bakers said it held out as long as possible on offering tap-and-go, and now the only solution was a surcharge to cover the cost of processing.
“Lots of people do love tap and go, but as more and more are using it, it’s costing us a fortune,” said cafe manager Michael Sanders.
Dench has taken up challenger payments platform Tyro, which offers least-cost routing to lower fees for smaller operators. But even though the costs of processing are lower than with a big bank, the impact on the hospitality venue is still significant.
“It was either [add a surcharge] or increase prices across the board,” Mr Sanders said.
The Christmas period is Dench’s busiest time of year, but the venue is insisting on surcharges even though not all customers are happy with the situation.
“Lots of people don’t love the surcharge, but then, more and more people are using [tap and go],” he said.