Retailers set to benefit from new tap-and-go agreements

paypass, contactless, payment, POS, credit cardThe Australian economy may be set to save up to $450 million per year if a tentative agreement between the big banks and the Australian Retailers Association on changing how tap-and-go credit card purchases are processed is implemented.

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Currently, tap-and-go purchases are processed as credit, which incur a higher transaction fee that’s based on a percentage of sales, as opposed to the option of cheque or savings that were offered to customers paying by card previously.

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has deemed the state of affairs as exploitative.

“Consumers and small businesses are being exploited for utilising the convenience of tap-and-go,” Carnell said.

“Small businesses are unwilling tax collectors for banks and international credit card companies. They don’t have the negotiating power of big business to get special deals.

“As we move towards a cashless economy, it’s vital that transaction fees are kept as low as possible,” she continued.

But under the agreement, which Australian Retailers Association executive director Russell Zimmerman said most of the banks have now agreed to, merchants will be able to decide how they route tap-and-go purchases.

Customers using dual network debit cards will still see funds subtracted from their savings accounts.

It comes after a parliamentary committee recommended last week that banks let merchants send tap-and-go payments from debit cards through Eftpos instead of credit.

“The committee recommends that banks be required to give merchants the ability to send tap-and-go payments from dual-network debit cards through the channel of their choice,” the committee recommendation said.

“Merchants should be able to choose whether to route these transactions through Eftpos or another channel, noting that consumers may override this merchant preference if they choose to do so.”

“We’re pleased to see that the majority of banks have now rolled over on this and we look forward to implementing this as soon as possible,” Zimmerman said.

He said it could take up to 18 months for the participating banks to implement the new system, which is expected to lower pressure on card surcharges or minimum payment thresholds.

The parliamentary committee said last week that if banks take no action by 1 April 2018, regulatory action should be taken to resolve the matter.

Carnell has welcomed the committee’s recommendation, saying she was encouraged by the ANZ bank, which told the committee that they would give merchants the choice.

“The average total merchant fee for a debit transaction is 0.26 per cent with Eftpos and 0.58 per cent with Visa or Mastercard and it’s higher for small businesses,” Carnell said.

“Shoppers aren’t given a choice with Paywave, as banks don’t allow merchants to choose the route through which contactless payments are processed.

“It’s estimated that processing tap-and-go transactions through credit cards instead of Eftpos costs businesses $290 million a year,” she continued.

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