Most small businesses have so far chosen to absorb the cost of Australia’s ban on credit and debit card surcharges rather than pass it on to customers, but Tyro expects more price rises in the months ahead as other cost pressures mount.
The ban, which took effect on October 1, removed surcharges on card transactions. The Reserve Bank said the rules were complex and confusing, and many merchants were charging between 1% and 1.5% on card transactions.
An analysis of hundreds of millions of transactions by Tyro, the fifth-largest Eftpos provider behind the big four banks, found that only 12.4% of merchants raised their prices in the first three weeks of October, despite rising interest rates, higher wages and other costs. The data covered about 65,000 merchants in hospitality, retail and services.
Tyro chief executive Nigel Lee said some businesses had been holding back price rises for 12 to 18 months and the “once-in-25-years surcharge change” was among several cost pressures. “Most of them are saying it’s rent, it’s electricity, it’s people costs, it’s the input costs from suppliers, and all of those are going up, and they’ve been trying to hold back the tide on much of that,” he said. “While card surcharges have disappeared, the underlying costs of accepting card payments haven’t.”
Lee said he expected more businesses to raise prices during the next six months. Tyro noted that businesses that did increase prices did so “well beyond their previous surcharge”.
The Reserve Bank’s fifth official interest rate rise this year, announced on Tuesday, added further pressure. Lee said it would “solidify negative sentiment in the housing market”. He said that feeds through to negative sentiment in disposable income and the way people spend.
Council of Small Business Organisations Australia chief executive Skye Cappuccio said the impact of RBA rate rises was threefold. “Consumers have less disposable income or pull back on spending, businesses face higher borrowing costs and many small business owners are also trying to service their own mortgages,” she said. “These pressures come on top of rising core business costs, significant increases in fuel costs, low consumer confidence, the cashflow impact of Payday Super and the ban on card surcharging.”
Cappuccio said some small businesses were trying to absorb the surcharge cost to remain competitive, while others felt they would have to increase prices. “Small business owners know cost-of-living pressures are affecting their customers,” she said. “They want to do the right thing by their customers and remain competitive, but that is becoming increasingly difficult as the costs of doing business continue to rise. Many small business owners feel like it has been one hit after another … with many reporting negative impacts on their mental health and wellbeing.”
Analysis
Why This Matters
- The ban was designed to simplify payments and reduce costs for consumers, but if businesses pass on surcharge costs through general price hikes, shoppers could end up paying more overall
- Small businesses face a cumulative cost crunch from interest rates, wages, fuel and the ban itself, raising questions about long-term viability
- The RBA’s latest rate rise may accelerate price increases, worsening cost-of-living pressures for households
Background
Australia’s Reserve Bank banned card surcharging in October, saying the system was complex and confusing and that many merchants were charging between 1% and 1.5% on card transactions. The ban was intended to eliminate a hidden cost for consumers, but businesses argued it would add to their expenses. Tyro is one of the nation’s largest Eftpos providers, processing transactions for tens of thousands of merchants.
Key Perspectives
Nigel Lee (Tyro CEO): says most businesses have tried to absorb the surcharge ban’s cost but are facing mounting pressure from rent, electricity, wages and supplier costs. He expects more price rises in the next six months and said the RBA rate rise will worsen negative sentiment.
Skye Cappuccio (COSBOA CEO): says small businesses face threefold pressure from rate rises (lower consumer spending, higher borrowing costs, and owners’ own mortgages) on top of fuel costs, low confidence, Payday Super and the surcharge ban. She reports that many owners feel it has been “one hit after another” and cite mental health impacts.
What to Watch
- Whether a significant share of small businesses raise prices in the next six months, as Tyro predicts
- The RBA’s next rate decision and its effect on consumer spending and business sentiment
- Any government or regulator response if widespread price increases undermine the intended benefit of the surcharge ban
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedMost small businesses have absorbed the surcharge ban so far, but Tyro expects more to raise prices.Stockhead: “Most business owners have so far chosen to absorb the hit to their costs since the credit and debit card surcharge ban took effect last month, rather than pass it on to their customers. But many of them are expected to succumb to growing cost pressure and lift prices during the coming months.”
- SupportedOnly 12.4% of merchants raised prices in the first three weeks of October.Stockhead: “has found that only 12.4% of merchants raised prices in the first three weeks of October”
- SupportedLee expects more businesses to raise prices in the coming months amid pressures including rent, electricity and people costs.Stockhead: “Tyro expects more businesses to lift prices during the next six months. Tyro chief executive Nigel Lee said some businesses had been holding back price rises for 12 to 18 months”
- SupportedThe surcharge ban took effect on October 1 and removed surcharges on card transactions.Stockhead: “the “once-in-25-years surcharge change” on October 1”
- SupportedTyro’s analysis covered about 65,000 merchants in hospitality, retail and services.Stockhead: “Tyro’s analysis covered about 65,000 merchants in the hospitality, retail and services sector”
- SupportedTyro is the fifth-largest Eftpos provider behind the big four banks.Stockhead: “Tyro, the fifth-biggest Eftpos provider after the big four banks”
- SupportedLee said some businesses had been holding back price rises for 12 to 18 months.Stockhead: “Nigel Lee said some businesses had been holding back price rises for 12 to 18 months”
- SupportedLee described rent, electricity, people costs and supplier input costs as rising.Stockhead: ““Most of them are saying it’s rent, it’s electricity, it’s people costs, it’s the input costs from suppliers, and all of those are going up, and they’ve been trying to hold back the tide on much of that,””
- SupportedLee said the underlying costs of accepting card payments had not disappeared.Stockhead: ““While card surcharges have disappeared, the underlying costs of accepting card payments haven’t.””
- SupportedTyro said businesses that raised prices did so well beyond their previous surcharge.Stockhead: “it noted that those businesses that did increase prices did so “well beyond their previous surcharge”.”
- SupportedLee said the latest RBA rate rise would “solidify negative sentiment in the housing market”.Stockhead: “He said the latest RBA rate rise would serve to “solidify negative sentiment in the housing market”.”
- SupportedCappuccio said rate rises affect consumers’ spending, businesses’ borrowing costs and small-business owners’ mortgages.Stockhead: ““Consumers have less disposable income or pull back on spending, businesses face higher borrowing costs and many small business owners are also trying to service their own mortgages,” she said.”