Australian retailers have thrown their support behind a new campaign calling for a end to ‘minimum spend’ surcharges, after new research revealed two in five Australian cardholders avoid shops that don’t provide card payment options for low-value transactions.
The campaign, ‘Zero Dollar Minimum”, launched this week on the back of new research commissioned by MasterCard, which revealed Australian businesses are missing up to 40 per cent of their business by not offering consumers the choice to make payments of any size with their choice of payment form.
The research of around 1000 Australian cardholders found consumers are increasingly aggravated when they need to pay cash for smaller purchases or where there is a minimum spend requirement.
Retailers participating in the campaign will offer consumers the choice to embrace the speed and convenience of using cards for all sized transactions with no minimum spend requirement.
According to the findings, 84 per cent of respondents resent restrictions such as paying a fee for smaller transactions; 62 per cent find it frustrating when they can’t use cards for small transactions and 44 per cent avoid shops that do not allow the use of cards for small transactions.
The research also found younger consumers will not stand for restrictions and are voting with their feet by taking their patronage to where they are offered payment choice with no minimum spend limit.
Russell Zimmerman, executive director of the Australian Retailers Association (ARA), said the research reinforces the need for retailers to listen to consumers and make purchasing from them as easy as possible.
“To stay competitive and relevant as Australians increasingly turn to payment methods other than cash, retailers of all sizes should offer customers the convenience and choice they seek. In return they should be able to deliver additional value back to their bottom line.”
More than 70 per cent of 18-34 year olds prefer cards for small transactions – more convenient than carrying small change, and 54 per cent of 18-34 year olds actively avoid shops that do not accept cards for small transactions
Retailers that have joined the campaign include Pattison’s Patisserie, Juiced Life and independent stores such as In Bloom Florist, Your Local Roaster and Origin Kebabs, among others.
Ian Hunt, owner of Hunts Newsagency in Canberra, told C&I Week he doesn’t have a ‘minimum spend’ fee instore as the average spend in his store is around $9, with many of the store’s customers under 25.
“The younger generation live on their cards these days and don’t want to pay a surcharge. Not having [a minimum spend limit] encourages them to come back to our store and also gives us an advantage over our competitors,” Mr Hunt said.
Garry Duursma, head of market development and innovation for MasterCard, said the research found that two in five Australian cardholders say they avoid shops that don’t allow them to use cards for transactions.
“This means retailers who impose a minimum spend for consumers using a card are potentially losing out on a staggering 40 per cent of customers.”
“Australia leads the world in contactless payments with now seven out of 10 MasterCard transactions being done in this way. This has changed consumer expectation and behaviour on card payments. Consumers have now found that a card payment is faster and more convenient than alternative payment methods. With this reality in their minds, consumers don’t understand why a retailer would restrict card payments for low value transactions. They make their frustration felt by voting with their feet,” said Duursma.
Same rules for all card payments, urges ARA
The ARA says retailers are being forced to wear unreasonably high acceptance costs on credit cards as a result of the Reserve Bank of Australia’s unequal regulation of companies providing card payments.
Mr Zimmerman said some cards cost retailers more than twice as much in fees to accept than others, leaving retailers with no alternative than to pass these costs on to consumers through a surcharge to be able to continue accepting these high cost cards.
“For many years, unequal regulation of payment cards has caused headaches for retailers,” Mr Zimmerman said.
“While the cost of accepting some cards has been reducing due to regulation, accepting other cards has remained unjustifiably high – an issue that has caused confusion for both retailers and shoppers.
“It is simply baffling why the RBA chooses to regulate certain payment companies, but not others. The ARA is calling for the RBA to apply the same rules to be applied on all payment schemes,” he said.
Unregulated card companies include American Express, Diners Club, and China Union Pay, who as a result, set the price of accepting their cards so high that retailers are forced to surcharge shoppers who use these cards instore.
“Surcharging is not a positive experience for retailers or customers and should be avoided, however, this can only can be done for low cost, regulated cards,” said Mr Zimmerman.
“The ARA has been pushing for reforms of card regulation and will continue to lobby the Government and RBA on this issue for a better outcome for both retailers and consumers.
“In the interim, it’s important for retailers to be aware that they may be contacted by unregulated payment companies in an attempt to have them absorb their excessive costs and asking them to help protect their market position.”