By Clancy Yeates SMH
ANZ Bank predicts a "large" proportion of its small and medium business clients could save money by changing how their customers' tap-and-go debit payments are processed, as the industry responds to pressure over the cost to merchants of electronic payments.
Following a 2017 threat of industry-wide regulation from the Reserve Bank, ANZ and Westpac have in recent weeks started allowing business owners to decide if they want contactless debit card payments to be processed by eftpos.
Previously, such payments were processed by Visa and Mastercard, which in many cases results in higher costs for businesses.
Suncorp is also trialling its changes in this area and plans to roll these more widely out around the end of the month, while National Australia Bank will start allowing most of its customers to choose how contactless debit card payments are routed over the coming weeks. Commonwealth Bank expects to launch its offering by the end of June
The changes are likely to save businesses tens of millions of dollars, with small bank Tyro reporting its clients have saved $2.7 million in fees since it introduced "least-cost routing" last year.
The spate of activity is the result of public pressure on banks, including from parliament's banking inquiry and the Reserve Bank's threat of late 2017, over a previous practice whereby tap-and-go debit card purchases were automatically sent through the Visa and Mastercard networks.
There would be a large proportion of our customers that will benefit from merchant choice routing. ANZ's John Collins
Retailers previously estimated that the routing of debit payments through the international card schemes' systems was costing them hundreds of millions in extra fees.
ANZ's payments and merchant services lead John Collins said the bank had started talking to new business customers about whether they might benefit from the new offering and 36 customers had taken up the service in the past week.
“Based on the statistics that we have looked at, and the uptake over the last week, there would be a large proportion of our customers that will benefit from merchant choice routing,” he said last week.
The size of any potential savings depends on the size of the transactions that the business processes and the fee arrangements of their bank. But Mr Collins said, that under ANZ's pricing, debit card purchases of more than about $30 would likely be cheaper to process through the eftpos infrastructure.
“The coffee shop – most of their transactions are under $30, so they’d be better of staying with Visa and Mastercard,” he said.
Australian Retailers Association executive director Russell Zimmerman said the changes announced by ANZ and Westpac were positive, but expressed disappointment the banks were offering an "opt-in" model rather than one where customers' payments were automatically processed through the lowest-cost channel.
ANZ's Mr Collins said this was a matter for individual business owners.
"The merchants need to make a conscious decision that it’s right or not right for their business, rather than us making a decision on behalf of them in terms of how they run their business,” he said.
Tyro, a smaller bank, started offering "least-cost routing" to merchants in March last year. Tyro chief executive Robbie Cooke estimated its merchants had saved more than $2.7 million from the change, with some businesses saving more than $50,000 in fees.
Suncorp will allow merchants to set a limit, so that some debit payments are processed by the international schemes, and others go via eftpos, depending on what makes sense for the business.
“We’re proud to be one of the first banks to offer small business customers choice in managing the cost of accepting payments from their customers,” said Paul Evans, Suncorp's executive manager for deposits and payments.