A blog on issues affecting Australia's newsagents, media and small business generally.

Tyro makes it case on the EFTPOS interchange fee announcement

Jost Stollmann CEO of Tyro sent me an email today with an interesting perspective on the EFTPOS interchange fee announcement yesterday.  I share it here as it is relevant to newsagents who compete daily with Coles and Woolworths.  Here is what Jost had to say:

Now it is all in the open. The banks, Woolworths and Coles have agreed on a new EFTPOS fee regime. The two big retailers continue to get paid by the banks an interchange fee of 4 to 5 cents for EFTPOS transactions whereas all the other Australian retailers get slapped with an estimated average 11 cents fee increase per EFTPOS transactions. Instead of receiving also the 4 to 5 cents as up to now, they have to pay 5 cents for a standard EFTPOS transaction. EPAL also charges a new scheme fee of one cent to the issuer and one cent to the acquirer. The volume is big. The Australian EFTPOS system processes 2 billion transactions per year. The facts:

1. According to yesterday’s Australian Financial Review, Woolworths and Coles have confirmed that they are not impacted by the EFTPOS fee increase because they process EFTPOS transactions directly with the issuing banks on the basis of bilateral arrangements. So they will continue to receive a rebate for each EFTPOS transaction based on the 4 to 5 cents interchange rate that the card issuing banks pay to them.

2. The rest of the merchant world has to expect higher EFTPOS fees from 1 October 2011 on. EFTPOS Australia Payments Limited (EPAL) has reversed and increased the EFTPOS interchange fee by 9 to 10 cents. It has added 1 cent scheme fee charged to issuers and 1 cent to acquirers. When banks pass through the cost increases, merchants have to decide whether they absorb the cost increase, raise prices, surcharge EFTPOS transactions or limit ETPOS acceptance.

3. Banks as well as Woolworths and Coles are in the enviable position to receive up to 5 cents per transaction to fund the EFTPOS technology upgrade of their central systems and to support their bottom line.

4. 325,000 merchants with 700,000 terminals, from Harvey Norman to the corner store, will have to worry about and pay to upgrade their EFTPOS technology. Their terminals have to be upgraded and/or swapped out to accept EFTPOS EMV (chip) and contact-less cards. They will have to motivate and pay their software vendors to integrate new EFTPOS functionality into their point of sale software or web sites.

The payment space is complicated, but Tyro works tirelessly to create transparency for the media and advocate fairness for the merchant community. This fee regime is not aimed at making EFTPOS competitive and ensuring its long term survival as claimed.

This is what Woolworths general manager for financial services, Dhun Karai, had to say to the AFR: “The likely threat for other merchants is that to provide revenues to the banks, they will be slugged with higher merchant service fees on eftpos which will diminish the attractiveness of eftpos in comparison to scheme debit cards.” She said Woolworths and Coles directly processed transactions with the issuing banks, which meant they faced no impact from the change.

So, this new EPAL regime is all about raising bank fees with the dire consequence of making EFTPOS less attractive for merchants to invest into and to offer to their customers. Merchants now suffer a significant competitive disadvantage compared to Woolworths and Coles. Cardholders will ultimately pay with higher prices, less competition and availability.

Recent demands that banks absorb the interchange fee is beside the point and naive. It would mean that the big bank issuing side raises fees and big bank acquiring side absorbs the same fees. They could have resolved that with internal accounting. The interchange fee is the problem, because it is not exposed to competition. No retailer or association is able to negotiate the interchange fee with his bank. This bank fee increase has to go! It is unjustifiable and untimely.

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EFTPOS fees

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  1. Brett

    This has gone straight to my local member. I find it intolerable that the big boys can get their heads together, design a new system, decide to implement it and then pass the costs on to others. Appalling behaviour.

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  2. Angelo

    This is outrageous in my view and I would hope that enough small retailers kick up some dirt about it.

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  3. Jarryd Moore

    The way I understand this is that Coles and Woolworths spend the money on infrastructure and maintenance to process EFTPOS transactions themselves. Their economies of scale allow this and they should be allowed to benefit from it.

    From the announcement my understanding was that transactions under $15 would not attract any interchange fee, transactions over $15 would incur a 5 cent interchange fee and cash out would attract a 15c rebate. Is this not the case?

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  4. Mark

    My understanding is that independent retailers will face new fees with we either absorb or pass on.

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  5. CAMERON

    The bloke in the milkbar at the local train station adds a dollar on if you want to pay by card. I like this idea. Eftpos is annoying – hundreds of dollars in bank fees per month and it slows down the queues, especially during big lotto draws. I hate being charged to give people cash out too, but i like to provide the service.
    I like the simplicity of just adding on a dollar. I don’t want to stand there with a calculator.

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  6. Mark

    Sales with a payout are fee free from Tyro.

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  7. Wendy

    Heard a rep from ATO on 612ABC Brisbane this week saying they are pushing for a cashless society. This comment was made during a discussion about more frequent audits cash based small businesses. So, if the ATO is pushing for a cashless society, small businesses will eventually be forced to rely on EFTPOS services which really only benefit banks. Just sayin.

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  8. ed

    just curious guys,

    what did you set as minimum EFTPOS purchase for lotto only?

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  9. Brett

    Minimum across the board is $10, staff have managemnt rights however to amend this based on indiv customer

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  10. Jarryd Moore

    Ed,

    We don’t have any min purchase for anything purchased with EFTPOS.

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  11. Mark

    It’s $5 for us with discretion at the counter.

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  12. Y&G

    Same as Brett – can be flexible.
    However we also offer the option of a $1 charge to cover costs.

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  13. Jarryd Moore

    A $1 charge for transactions under $10!!! That’s a surcharge of >10%. If the customer spent $5 thats a surcharge of 20%. Hardly just covering costs.

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  14. Max

    Once again the king of assumption, Jarryd.
    How would you know what anyone else’s fees & costs are. The little guys are really slugged by the banks.

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  15. Y&G

    Without going into specifics, Jarryd, suffice to say that with small, low-margin purchases, our costs for EFTPOS factored in would make some sales negative.
    But whatever you say.

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  16. Richard

    We have a .50c surchage for any eftpos transaction under $10. And .50c surcharge if they want cash out, but you only pay the sucharge once in a single transaction.

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  17. ed

    ours is $10 for lotto only purchase…… other higher margin purchases is at our discretion……..

    we pay 25cents per eftpos transaction, and higher if certain premium credit cards. it’s not like we earn a lot from lotto commision.

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  18. Jarryd Moore

    Max, Y&G,

    You cant seriously be claiming that your being charged $1 per EFTPOS transaction. From the fees i have seen being paid 25c would be at the higher end.

    As a side note it is also illegal for a retailer to claim they are covering the cost of EFTPOS fees unless they are charging the customer the actual amount their financial institution charges them to process the transaction. Ive seen a few stores with signs claiming to be covering the cost of processing the transaction when in actual fact they are making a profit from it.

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  19. Y&G

    Didn’t actually say that, Jarryd.
    It’s not only the cost of the fee.
    Besides, it’s an option, not a rule. No more, no less.

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  20. Max

    25 cents is NOT the highest fee being charged by some banks. If you are very small like us (less than 3% of total transactions are eftpos) there are different deals that the banks will offer.
    Most people are happy to pay a $1.00 charge when buying a $3.00 item (and then get out $50 cash as well). It is cheaper than the $2.00 being charged by the ATM’s down the road.

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  21. Mark

    Show around. There are good deals out there even for small transaction volumes. I told the ANZ I was moving in one of my stores and they immediately cut my fees by 25% on credit card and EFTPOS transactions,. While I moved to Tyro anyway, the discount was offered on the first mention of a possible move.

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  22. ed

    as far as i know, with tyro, IF customers get cashout…..then we merchants don’t pay the 25 cent eftrpos fee

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  23. Chris Ball

    Hi all
    I manage newsagent business development at Tyro. We are running a fantastic promo at the moment, providing a faster, smarter, cost copetitive EFTPOS alternitive to the big banks! I’d be happy to discuss further how we can help and welcome your call/email. 02 8907 1748 or cball@tyro.com

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