Small businesses in a Catch 22 over bank fees

Australia's small businesses are paying up to 10 times more in bank fees than big businesses according to the RBA's Payment Systems Board Annual Report.

Banks are charging small businesses as much as 2.0% in interchange fees to process credit and debit card transactions but as little as 0.20% for big businesses.

Australians spent $434 billion on credit and debit cards in 2012/13. According to the RBA report banks charge different interchange fees because of the perceived riskiness of the transactions.

Bank fee inequality is making it harder for small businesses to survive says independent payment provider Tyro Payments.

"Small and medium sized businesses are having to compete with financial lead in their saddlebags, courtesy of the major banks," said Joss Stollman, CEO of Tyro.

It is a catch 22 for small businesses. Small businesses can pass on the higher bank fees and lose customers, or absorb the costs and lose profits.

"This is unfair; it is inequitable and truly indefensible," said Mr Stollman. "Australia's small businesses are the engine of jobs growth in this country, but they are simply not getting a fair deal from our major banks."

This week ANZ bank announced a record profit of $6.49 Billion for the last financial year, exceeding most analysts forecasts.