The Tyro Blog

18 November 2015 - 3 min read

Business Strategies

Remove fees and the banks’ hands from your till

“Interchange fees are like the bank having their hand in the till on every transaction.”

This is what one of our merchants wrote when we asked them what they thought of the interchange fees charged by the banks whenever a customer makes a purchase using their debit or credit card.

We think that’s wrong and want to change that. We’ve started a campaign on behalf of Australian businesses to have these fees abolished. Here’s why.

No-one likes being ripped off. But that’s the general sentiment of the small business community in Australia when you ask them about bank-imposed interchange fees. When something really impacts your livelihood, you care.

So what’s to be done? Well, plenty. In June, Tyro started campaigning hard on this issue as pressure began to mount on Visa, Mastercard® and the banks to do something about the rising costs for merchants. We believe the majority of small business owners surcharge to recover the interchange fees. Get rid of interchange fees and you get rid of surcharging.

Banks argue that interchange fees are essential in keeping interest rates and fees on credit and scheme debit cards low for consumers. Yet why then are credit card interest rates more than 20% for some cards, a near-record spread between the RBA official interest rate of around two percent? Something just isn’t adding up.

The Financial System Inquiry recommended interchange regulation be reviewed. We believe any regulation downwards in this space will alleviate the increasing incidence of surcharging. Good news is that precedents have already been set in other parts of the world. In April, the European Council of the European Union regulated to cap credit card interchange to 0.3 percent of the value of the transaction and to 0.2 percent for debit cards.

As consumers we love to moan about merchants who try to sting us an extra fee. What we probably don’t realise is that business don’t like surcharging us either, but they’re stuck between a rock and a hard place. And consumers aren’t the only ones getting surcharged. Small business now face surcharges from their own suppliers.

There’s no question some surcharging is ridiculous. And we fully support any action to clamp down on surcharging beyond the cost of card acceptance. But more often than not the crazy surcharges come from big corporations and airlines, not small business.

As banks continue to ‘bank’ super profits each year, it becomes an increasingly bitter pill to swallow for the SME community who are forced to dig deeper into their pockets to meet rising card acceptance costs. The system has to give somewhere. Logic would suggest those with the capacity to pay should be asked to first. Not business. Not consumers. But the banks.

I’ll leave you with this quote from one of our merchants. Because after all, that’s why we we’re in the SME banking business – to return fairness back to banking.

“Thanks for sticking up for us little people and best of luck. Small business is the backbone of this country, there are so many of us, however we never seem to be heard or receive real incentives to help us prosper.”

Let’s raise the debate and stop pitching small business against consumers. It’s simple. Remove interchange fees and surcharging will stop.

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