Westpac to cut tap-and-go merchant fees

Aug 5, 2020

www.afr.com

Westpac will process contactless debit card payments over the lower-cost eftpos network for 37,000 merchant customers in a move the bank says will help small businesses recover from the pandemic.

The Reserve Bank and government have pushed banks to reduce tap-and-go fees by providing ‘‘least-cost routing” (also known as merchant choice routing).

This typically involves switching multi-network debit card transactions processed through the Visa and Mastercard networks to eftpos. The RBA says using eftpos costs merchants an average of 0.3 per cent of the transaction value, compared with an average of 0.5 per cent for Visa and Mastercard debit.

Westpac has offered merchants the ability to choose eftpos since last year, but very few did so. The bank put this down to the complexity of fees.

It will now contact customers it has identified as saving money from the switch, informing the new arrangement would apply unless they opted out.

It is understood the switch will cost Westpac about $7 million in annual fee income. It will take a few months to make the change, meaning the option should be available for merchants in Melbourne soon after the city emerged from the tough new lockdown.

‘‘We believe that proactively helping our merchant customers is the right thing to do,” said Guil Lima, chief executive of business banking at Westpac.

‘‘Digital payments have soared in recent months as customers shop online more and shun cash, trends being accelerated by the pandemic. But payment costs can be meaningful for businesses, and anything we can do to bring down their overall running costs is positive at a very challenging time for the economy.”

The move came after Reserve Bank assistant governor Michele Bullock warned banks in June to reduce tap-and-go fees for retailers, a call backed a few weeks later by senator Michaelia Cash at The Australian Financial Review Virtual Retail Summit.

Westpac’s decision will force other banks to consider following suit. That could frustrate Visa and Mastercard, which believe data on payment costs does not allow apples-for-apples comparison of pricing and have called on the RBA to collect more granular data from banks.