NSW Small Businesses Struggle with Merchant Fees After Card Surcharges Ban

Small businesses across New South Wales are struggling to adapt to a recent ban on credit and debit card surcharges, introduced by the Reserve Bank of Australia (RBA) in the interest of transparency and consumer clarity. The changes, which came into effect on October 1, have left business owners grappling with how to cover the cost of merchant fees.

The RBA has stated that the ban is in the "public interest", aiming to simplify the payment system for both businesses and customers. However, this shift has significant implications for small businesses, which must now find alternative ways to absorb or pass on the costs of merchant fees.

Business owners feel the pinch

Sydney cafe owner Philip Barbaro has already felt the impact, with his business paying around $150,000 in merchant fees annually. "For the group, we pay about $150,000 in merchant fees per year. Now that is a big hit to my business," he said.

To offset these costs, Barbaro has increased prices for some items on his menu, while keeping coffee prices steady in the competitive Sydney market. "In my very competitive market in the city we have not touched the price of our coffee, but there were other items on the menu we had to increase this week, to offset the bank surcharge."

Exploring alternative solutions

Specialist baker Chris Skuce, owner of the Jamaican Patty Bakehouse in Sydney's inner west, is also feeling the strain. Although he has not yet passed on the costs to consumers, he anticipates a price increase in the new year. "I haven't passed the cost on yet, but I will increase my prices at some stage probably in the new year," he said.

Skuce, who opened his shop as a tribute to his Jamaican heritage, currently absorbs the cost of bank fees to keep his products affordable. However, he questions the benefits of the RBA's changes, stating, "I am befuddled with the change. Another hit to the bottom line and completely unnecessary in my opinion."

Industry response and advice

Executive director of Business Sydney, Paul Nicolaou, acknowledges that businesses are facing significant challenges, including rising interest rates and energy costs. "There have been rising interest rates, energy costs and the subsequent drop in discretionary spending affecting both households and business," he said.

Nicolaou emphasizes that businesses must cover their costs, which often means passing these on to consumers. He also suggests that banks and payment platforms should reconsider their fees, questioning, "It is all electronic now, does it require a fee?"

In response to the changes, some businesses are exploring discounts for alternative payment methods. A spokesperson for the Australian Competition & Consumer Commission (ACCC) notes that businesses can build fees into their pricing structure but must not mislead consumers about price changes or reasons for them.

Barbaro is considering offering cash discounts as an incentive, stating, "I am currently looking at potentially giving people a discount if they pay with cash." On the other hand, Skuce does not see cash discounts as a viable option, saying, "Most people want to pay by card. It is just a hassle to handle cash."