Strong action needed to end punishment of SMEs
An ACCC inquiry is needed to establish why Australia’s 350,000 small and medium businesses are being charged an estimated $400 million more in fees than they should every year, or up to 10 times1more than big business, Australia’s leading independent EFTPOS provider said today.
Tyro Payments made the recommendation as part of its submission to Australia’s Financial System Inquiry. “Small and medium sized businesses (SMEs) employ more than seven million Australians2, they are the engine of jobs growth in this country, yet they are having to compete with financial lead in their saddle bags, courtesy of our major banks,” Tyro CEO Jost Stollmann said today.
“On average an SME business processes about 250 Visa and MasterCard credit or debit card transactions monthly. The interchange fee1 on each transaction costs them 53 cents, adding up to $1,600 per year.3 In comparison, big retailers bring in much larger profits and only pay about 16 cents for the same transaction.4 “
The Australian Competition and Consumer Commission needs to investigate why Australia’s major banks can treat our small and medium sized businesses with such contempt.” Mr Stollmann said the Financial System Inquiry was a one off opportunity to bring Australia up to a competitive international level when it came to innovation, productivity and healthy market competition. Australians spend more than $480 billion a year on their credit and debit cards.
“Australia has lagged behind other Western countries when it comes to encouraging innovation and exploring new technologies,” Mr Stollmann said. “The finance and banking sector has not faced an inquiry of this kind in 16 years, since the Wallis Report.5 Business and markets have changed significantly since then.” Tyro’s submission to the Financial System Inquiry includes four key recommendations;
- An ACCC Inquiry into the anti-competitive structure and behaviours in the Australian payment space dominated by the four major retail banks
- A review of the Australian Government procurement policies and procedures to promote competition and innovation through open panel tendering of payment services in its multi-billion dollar budgets
- An engaged regulator to open up access of the payment system to new technology players, while maintaining supervision and a level playing field
- A review of the overcharging and cross-subsidies that currently disadvantage the small to medium business community
“There are many obstacles that Tyro and other new entrants to the payments industry face in their effort to bring innovative, less expensive financial and banking services to Australian consumers and small business markets,” Mr Stollmann said. “The anti-competitive structure and behaviour of Australia’s oligopolistic banking sector stifles innovation, reduces productivity, eliminates choice, taxes the SME business community and ultimately increases costs for the consumer.
Australia has seen strong consolidation of the banking industry without new entrants challenging the oligopolistic structures, this very much highlights the need to intensify reforms in the payments space. “It’s ultimately in the best interest of everyone, SMEs, the major retail banks, government bodies, card issuers and merchants to encourage, fund and support innovation and healthy market competition.”