Following recent discussions on card surcharges by major banks, Luke Fossett, General Manager of GoCardless Australia and New Zealand, emphasized the need to scrutinize other burdensome fees like dishonour fees, often found in gyms.
He noted that these fees can quickly add up, straining consumers and unfairly impacting the reputation of small and medium-sized businesses, even when they aren’t the ones imposing them.
“It’s great to see attention shifting to card surcharges and their impact on SMBs. The Economic Committee is on the right track. It’s also a good reminder to look at dishonour fees. These fees can pile up when payments fail, adding financial strain on consumers and creating a negative sentiment towards SMBs, even if they aren’t the ones imposing them.
Failed payment fees are wrongheaded and often used in ways that are deeply anti-consumer and anti-business. Transparency in the payments landscape is crucial and dishonour fees often lack this. It’s not uncommon for these fees to be used as a way to boost profits, rather than being a true reflection of the cost to the business.
In a time when the cost of accepting electronic payments has fallen by over 30%, according to Commonwealth Bank Chief Executive Matt Comyn, these fees seem more burdensome than necessary. Unlike other electronic payment processes such as chargebacks, failed payments simply do not incur significant costs that would justify hitting the consumer with more bills. There’s a strong desire for change in how failed payments are handled. Our Pursuing Payments report found that 62% of Australian business owners and key decision-makers want to introduce technology to help reduce failed payments.
The Federal Government should consider implementing a broad cap on surcharges, not just for cards but for any fees that seem excessive or lack transparency. As businesses and consumers navigate the cost of living crisis, it’s more important than ever to ensure that the payment landscape is fair, transparent, and works for everyone. A broader cap on surcharges may help to alleviate these pressures, providing much-needed relief for consumers and SMBs.”
On Friday, Irvine addressed the parliamentary committee investigating the big four banks, declaring that card surcharges are outdated. The practice, endorsed by the Reserve Bank of Australia (RBA) in 2003 to encourage the use of lower-cost payment methods like debit cards and cash over credit cards, no longer serves its original purpose, according to Irvine.
“Debit is much more prevalent now,” Irvine noted, questioning whether surcharges are still necessary. He argued that surcharges add to consumer confusion, making it difficult to know the true cost of a purchase, which he finds unacceptable.
Under current RBA rules, enforced by the Australian Competition and Consumer Commission (ACCC), businesses cannot add a surcharge that exceeds the cost of processing a specific payment type. The RBA has estimated the cost of processing Visa and Mastercard debit and credit card payments to be between 0.5% and 1.5% of the total purchase price.
Irvine recounted a “shocking” experience earlier this year when he was charged a 10% surcharge for a coffee, calling it “outrageous.” He expressed hope that if surcharging continues, it will become simpler, more transparent, and consistent.
Notably, surcharges are banned in the United States, Canada, Europe, and Britain.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
