In Australia, the way consumers pay for goods and services seems to be changing fast. According to a recent consumer payment behaviour report by the RBA (Reserve Bank of Australia), cash is losing its popularity, accounting for just 13 percent of transactions in 2022. Instead, a significant 76 percent of payments are now made using cards1.
Providing customers with the convenience of card payments via EFTPOS machines aligns with the current trends according to the report by RBA1; However, this transition incurs EFTPOS transaction fees for businesses, which can accumulate. Recognising these fees, understanding their impact on overall business financial health, and taking control of them are beneficial for the overall sustainability and efficiency of businesses.
Here, we will explore the concept of merchant fees and dive into practical strategies to help businesses reduce these fees.
What are merchant service fees?
Merchant service fees, or EFTPOS card transaction fees, are costs that businesses incur for each card transaction they process, often charged by their payment service provider. The specific fee amount can vary depending on the type of card the customer uses and the card network handling the transaction, like Visa or Mastercard.
Tips for reducing EFTPOS card transaction fees
Surcharging
A surcharge is an additional fee that business owners can add to credit or debit card transactions, on top of the listed retail price. This extra charge helps offset the expenses associated with accepting card payments.
The primary benefit of surcharging is that it enables businesses to keep more of their earnings. By implementing surcharges, you safeguard your profit margins and make sure that the costs related to card payments are adequately covered.
How much can businesses surcharge?
Before you implement, you will need to understand the regulations behind surcharging.
The Reserve Bank of Australia introduced the surcharging framework in 2016/17 to give businesses the right to surcharge, to cover the cost of accepting cards while ensuring consumers are not excessively charged2. In other words, to ensure things are kept above board, you’re not allowed to add a surcharge that’s greater than the cost of accepting a payment by a credit or debit card.
Tyro’s Dynamic Surcharging
Tyro EFTPOS machines have an embedded Dynamic Surcharging3 functionality which allows your business to set up and automatically apply card-specific surcharges to most card transactions. To help you stay compliant, when configuring card-specific surcharges, you can review your cost of acceptance for each card type in the Tyro Portal. Dynamic Surcharging is easy to set up and an efficient method to reduce EFTPOS costs.
No Cost EFTPOS
No Cost EFTPOS is a Tyro pricing plan that allows you to recoup the costs of your Tyro EFTPOS facility and enjoy a $0 monthly bill by passing on a surcharge to your customers. 1 By transacting more than $10,000 per month, you pay no EFTPOS machine rental for that month so you can maximise your savings in every bill. 2
While No Cost EFTPOS might be available from different providers in the market, it’s important to stay cautious about service limitations and possible hidden fees. Tyro’s No Cost EFTPOS does not charge for set-up, integration, exit, or chargeback fees. This transparency helps create a straightforward and cost-effective solution for your business.
Tap & Save (Least-cost Routing)
Another great way to reduce EFTPOS transaction fees is by using Tyro’s Tap & Save5, our version of Least-cost routing. This feature is designed to keep costs down by processing eligible transactions through the cheapest available network. Eligible transactions include contactless dual-network debit cards.
When it comes to debit card transactions, they can be routed through different networks like eftpos, Debit Mastercard®, or Visa Debit, each with varying costs for businesses. By enabling Tyro’s Tap & Save, you’ll automatically direct eligible debit card transactions under $1,000 to the most cost-effective network, which help your business to reduce card transaction fees for eligible transactions5.
Final thoughts
In a world where card payments have become the norm, small businesses encounter the challenge of handling fees linked to these transactions while also improving the customer experience. We’ve explored three strategies to help solve this challenge.
It’s important to understand your industry, customer base, their behaviour, and expectations. Once you’re clear on this, you can then implement a strategy that aligns best with your unique circumstance.