It’s no secret ‘tap and go’ fees take a chunk out of small business profit, but switching to a cheaper debit network could help to drastically slash this cost.
According to Eftpos, retailers could save up to 40% on fees by routing their customers’ contactless transactions through the local Eftpos system rather than global payments providers like Visa or Mastercard.
This method is known as least-cost routing (LCR), and applies to Australia’s 35 million dual-branded debit cards, which feature the ‘eftpos’ logo on one side and international programs like Visa payWave and MasterCard PayPass on the other.
LCR prevents banks from automatically processing ‘tap and go’ payments through these international schemes, which are said to charge fees four times higher than Eftpos. Instead, retailers can opt to send transactions via the lowest-cost network available.
Eftpos chief executive, Stephen Benton said LCR is a way for retailers to protect their cashflow while they rebuild their business post-coronavirus shutdowns.
“With debit cards accounting for more than 70% of card transactions in Australia and more consumers moving away from cash after COVID-19, routing has the potential to deliver significant savings for many thousands of small and medium businesses across the country,” he said.
“In turn, these cost savings could also flow to customers in the form of lower prices or reduced surcharges.”
The Reserve Bank has previously indicated it could consider mandating LCR, as part of its review of retail payments regulation this year.
“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 RBA said.
Other business cashflow tips
Besides lowering the cost of receiving payments, small businesses could make up for lost revenue in a number of other ways. Here are a couple of quick tips:
- Listen to your customers: Take a step back and see how your customer’s needs or concerns are shifting with the times. Are they worried about hygiene when dealing with physical goods? Do they now prefer home deliveries over in-store shopping? Reconsider how you can connect your products to customers. When you make your customers feel heard, you give them more reason to stay on board and purchase again.
- Consider a business loan: As the economy reopens, you may find you need additional working capital to cover expenses like staff wages and stock. If that’s the case, a business loan could help. Right now, accessing extra finance should be easier under the government’s SME Loan Guarantee Scheme, which guarantees 50% of unsecured business loans from eligible lenders until 30 September.