Small businesses absorb card surcharge ban but price hikes loom

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, according to one of the nation’s leading Eftpos providers.

But many of them are expected to succumb to growing cost pressure and lift prices during the coming months.

A new analysis of hundreds of millions of transactions by Tyro, the fifth-biggest Eftpos provider after the big four banks, has found that only 12.4% of merchants raised prices in the first three weeks of October, despite mounting pressure from rising interest rates, higher wages and other costs.

It paints a picture of businesses struggling to juggle keeping customers happy while trying to afford higher costs, which took another hit on Tuesday with the Reserve Bank of Australia’s fifth official interest rate rise this year.

It could prove a tipping point, and 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 and the “once-in-25-years surcharge change” on October 1 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.”

Tyro’s analysis covered about 65,000 merchants in the hospitality, retail and services sector, and it noted that those businesses that did increase prices did so “well beyond their previous surcharge”.

Lee said he expected more businesses to raise prices during the next six months.

He said the latest RBA rate rise would serve to “solidify negative sentiment in the housing market”.

“That feeds through to a negative sentiment in disposable income, which feeds through into the way in which people spend in the economy.”

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.”

The RBA banned surcharges on credit and debit card transactions because, it said, surcharging was “no longer achieving its intended purpose”. The rules were complex and confusing, it said, and many merchants were charging between 1% and 1.5% on card transactions.

Cappuccio said some small businesses were trying to absorb the surcharge cost to remain competitive, many were already absorbing them before the ban kicked in, but 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.”

This article first appeared in The Australian as Small businesses absorb card surcharge ban but price hikes loom.

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