How do businesses charge for EFTPOS transactions? Live eftpos automates surcharging

Person paying with card via EFTPOS machine at a cafe.

As you use your debit card or mobile wallet to tap and pay for your daily coffee, it’s easy to forget there are numerous costs associated with that simple action (and that you may be paying a small fee for this convenience). But small business owners will understand the financial commitment that comes with operating a cashless payment system.

That’s why payment service provider Live eftpos is offering 7,000 small businesses a ‘fee-free’ EFTPOS plan. This relates specifically to the card transaction fees merchants can pass onto customers (we’ll get into the other costs soon), and doesn’t mean customers will get a fee-free payment experience. 

Rather, customers using major cards including Visa, MasterCard and American Express will be charged a flat 1.65% for in-store purchases (1.95% online), which ensures the costs to small businesses for offering EFTPOS are covered. This replaces the Live eftpos system (similar to many other providers) of fluctuating transaction costs that needed to be reconciled by businesses monthly.

Additionally, Live eftpos won’t charge service fees for merchants that transact more than $5,000 monthly and will allow them to earn 1 Qantas Point for every $25 in transactions.

What do businesses pay to use EFTPOS?

To answer this question, it’s important to first understand what EFTPOS is and how it works. The acronym stands for ‘electronic funds transfer at point of sale’ and it’s the technology which allows customers to use various cards or devices to pay for products and services at shopfronts, sans cash. 

But for a business to be able to use this system, they need to sign a contract with an EFTPOS-approved provider, which includes the major banks and a handful of other vendors (some offering no lock-on contracts). This all comes at a cost. 

Each different EFTPOS vendor can set different fee schedules. While they won’t necessarily charge all of these fees, here are a few common EFTPOS costs businesses have to consider:

  • A monthly plan fee. Most EFTPOS providers charge a monthly fee, some starting at around $30 and others climbing into three figures. You might see this listed as the EFTPOS terminal rental fee (i.e. for the machine itself). An establishment fee may also be charged when a business first signs up with a vendor. 
  • Card transaction fees. Some EFTPOS providers include an estimated volume (often expressed as a dollar limit) of card transactions as part of their monthly plan, so merchants always pay a set figure. Others apply a separate cost per-transaction, normally expressed as a percentage of each purchase which is variable depending on the card type, and will increase with the number of transactions made. Some offer a combination of the two methods.
  • Additional payment type fees. Businesses may have to pay extra if they want to accept payments over the phone or for specific cards like American Express and Diners Club.
  • Extra EFTPOS machine fees. Most EFTPOS plans include a single or set number of machines. If your business needs more, you’ll generally need to pay more.
  • Printing costs. You'll need to pay for additional printer rolls and ink to keep the EFTPOS machines in working order.

So, there’s a lot to weigh up when choosing an EFTPOS vendor and plan, particularly for small businesses with tight margins. But how do these costs flow onto customers?

Do businesses charge customers to use EFTPOS?

The short answer is yes, they can if they so choose, but there are rules governing how this is managed. The Reserve Bank of Australia (RBA) dictates that businesses can only place a surcharge on payments to cover the cost of them processing it, which is known as ‘the cost of acceptance’. 

This cost is usually determined by transaction processing fees the merchant pays and the cost of EFTPOS machine rental and upkeep, but could also reflect things like fraud prevention and other insurances. 

It’s the job of the Australian Competition and Consumer Commission (ACCC) to ensure that these surcharges adhere to the RBA’s definition of not being ‘excessive’. The ACCC’s estimation of ’reasonable’ surcharges for different types of payments is between 0.5% and 2%. However, the body recognises this will vary between different business types, and smaller businesses often face higher costs than this which may be passed onto customers.

Any surcharge within the acceptable level that a business decides to pass onto customers is voluntary – merchants can choose to cover these costs entirely. 

EFTPOS QR codes to reduce merchant costs

Earlier in the year EFTPOS announced it would be deploying a QR payment system across the country in an effort to reduce the cost to businesses using the payment system. Increased security, digitised receipts and additional loyalty rewards have all been touted as benefits of the new infrastructure.

Trials are now underway, with the project slotted to rollout nationally sometime in 2022.

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