Retailers’ new alliance to target unfair “tap and go” charges

B2B, charges, least cost routing
tap-and-go contacless payment card pdq background copy space with hand holding credit card ready to pay

In the countdown to the Reserve Bank of Australia’s Review of Retail Payments Regulation, four of Australia’s leading retail associations have joined together to support struggling merchants who are being unfairly hit by high fees for “tap and go” card transactions.

The associations have formed the Fairer Merchant Fees Alliance to push for a fair go for Australian retailers, especially small businesses who suffer most from the excessive charges.

When people use their cards to “tap and go”, those transactions are often automatically routed through expensive international payment networks. As a result, merchants are being slugged hundreds of millions each year in hidden fees. The costs are either passed on to consumers as a surcharge or higher prices, or reduce the merchant’s bottom line – hitting consumers’ wallets while damaging Australian businesses, especially in the under-pressure retail sector.

This ongoing problem can be fixed by a system known as Least Cost Routing (LCR), which should be automatically enabled across payment networks – or at least given as an easy option for merchants to choose. This would ensure that every “tap and go” card payment would be sent through the lowest cost network for that particular transaction, either an international network or, often, EFTPOS, the local Australian network. However, this is not automatically enabled on the payments system today and the big banks are perceived to be dragging their feet setting it up. There is also the potential to implement LCR into online and digital payment systems, which could lead to further savings.

In a recently released Issues Paper regarding its Review of Retail Payments Regulation, the Reserve Bank of Australia said, “For most merchants, payments by EFTPOS can be significantly cheaper for them to accept than payments via the international schemes”. It also stated, “None of the major banks has taken advantage of the ability to implement LCR ‘in the background’ as a way to offer improved pricing for smaller and medium-sized merchants on simple merchant plans”.

The Fairer Merchant Fees Alliance wants to fix the system through action by the banks, regulators and government. It comprises the Australian Convenience and Petroleum Marketers Association (ACAPMA), the Australian Retailers Association (ARA), the Council of Small Business Australia (COSBOA) and Master Grocers Australia (MGA).

“We’ve formed the Alliance to push hard on this,” COSBOA CEO, Peter Strong, said. “The fee gouging is harmful to businesses, and the banks should be doing much more to educate their customers, give them options and save money for everyone.”

ACAPMA CEO Mark McKenzie said that banks needed to be more transparent with their fee structures. “Payments and fees are a complicated business, and many smaller retailers struggle to understand the true nature of the costs they’re expected to pay,” McKensie said.

Australian Retailers Association executive director Russell Zimmerman said the current system was hitting retailers hard. “With several retailers advising that they are insolvent, and many Australian retailers concerned about reduced profits, dealing with exorbitant fees forced on them by the banks is a problem they should not have to face,” Zimmerman said. “Australian retail needs the banks to step up, do the right thing for the retail industry, and offer Least Cost Routing to all retailers large and small.”

Master Grocers CEO Jos De Bruin said, “The cost of not implementing Least Cost Routing is significant and unnecessary – with the current decline in retail spending, merchants are facing numerous headwinds and don’t need this as well.”

In addition to the retail association support, the Payments Consulting Network offers Australian businesses information on Least Cost Routing via its Merchant Pricing Hub website, where they can find providers and how much they could save.