Earlier this year, ACAPMA drew attention to the fact that many small to medium fuel retailers had experienced a sharp increase in merchant fees in recent years. (See ACAPMAg article Quiet increase in debit charges for many fuel retail businesses)
Investigation of the source of this increase revealed that the cost of debit transactions (as opposed to credit transactions) had almost tripled for many fuel retailers – apparently due to the introduction of ‘Tap n Go’ for consumers.
The problem was further compounded by the fact that Australian consumers have increasingly shifted to debit cards for regular low value transactions (e.g. fuel)in recent years -as opposed to further building up household debt on credit cards.
“When we examined the cause of the observed increase in merchant fees, it was clear that the change in cost of debit transactions – coupled with the increasing volume of debit transactions – had more than doubled transactions costs for many fuel retailers in recent years”, said ACAPMA CEO Mark McKenzie.
ACAPMA’s research revealed that many small to medium fuel retail businesses (e.g. dealers and independent servos) are now paying an average of 42 cents to process a single $60 debit transaction.
This compares with a cost of just 8 cents for the same transaction just three years ago.
“In other words, the average cost of debit transactions appears to have increased by a whopping 425% in just 4 years!”, said Mark
Given the large volume of low value (i.e. less than $100) transactions processed by a fuel retailer on any given day, the fuel retail industry is more affected by these changes than many other retail industries in Australia.
Further, these fees are being levied on a transaction where up to 45% of the transaction is fuel excise and GST. This which means that fuel retail businesses are paying more for the privilege of collecting Australian Government taxes – with both the Banks and the Federal Government staying silent on this issue.
To change this situation, ACAPMA joined forces with the Council of Small Business Organisations (COSBOA) to lobby the Reserve Bank, the Federal Government (and anyone else that would listen) to intervene on this issue.
“And I am pleased to report that these efforts have delivered results”, said Mark.
ACAPMA has learned that this increase in costs is due to most of current payment terminals being programmed to process ‘Tap n Go’ transactions via the higher cost card scheme gateways (i.e. Mastercard and Visa) by default, rather than the lower cost EFTPOS gateway.
While this historically occurred because most consumer cards were not able to process EFTPOS transactions via Tap N Go, this situation has since been corrected with the issue of new consumer cards in the last few years.
But no-one – not the Banks, not the card providers and not the Government – is telling merchants that they now have the right to demand which payment rout is utilised to process their debit transactions.
“The silence of all involved in this issue is staggering – particularly when you consider that our industry is freely be criticised for charging consumers 2% more for fuel than our critics believe is justified”, continued Mark
Fuel retailers can now choose how their debit transactions are processed – and the Banks have committed to accommodate this choice (albeit that most are doing it at their own pace).
That is, fuel retailers can choose to process transactions via the lower cost EFTPOS gateway as opposed to the higher cost card scheme gateways (i.e. Mastercard and Visa) – at a saving of around 28 cents per transaction (at 2018 costs).
If fuel retailers want to reduce the costs of processing their debit transactions, then they need to follow three simple steps:
- Have a look at what you are currently paying for debit transactions. If your transactions costs are bundled – a ‘neat trick’ to hide what you are paying to process debit transactions – ask your bank or merchant services provider to report debit transactions separately.
- Contact your current merchant services provider to seek a change in your terminals so that they have the capacity for you to elect which payment gateway is used to process debit transactions via Tap N Go. That may involve a change in terminals and monthly terminal costs, but this will be paltry when compared with the total monthly costs of your transactions.
- Work with your bank to programme your terminal to process all debit transactions by EFTPOS as a default.
Importantly, if your Bank (or other merchant services provider) does not offer a choice of payment routing for debit transactions then look for another provider.
“This silent rort has gone on for way too long”, said Mark
“Fuel retailers have the capacity to choose and it is time to fight back”, added Mark
“After all, it is fuel retail businesses that are bearing the costs of transactions – not the banks, not the card scheme providers and, quite rightly, not the customer”, concluded Mark