Pubs and other hospitality businesses around the country are considering going cash-only, as the new ban on card and related surcharges looms.
For more than 20 years consumers using their own money, paying with debit cards, have typically paid the same fees as people using credit cards.
Most small businesses, encouraged by payment service providers, charge the same ‘blended’ rate for both types of transactions, combining the individual Interchange, Scheme and Acquirer Margin fees.
But the Reserve Bank issued a statement declaring the surcharging framework was “no longer achieving its intended purpose” of prompting consumers to make “more efficient” payment choices.
In April the RBA released its new policy, that all surcharges on debit, pre-paid and credit cards will end on the EFTPOS, Mastercard, and Visa networks on 1 October.
The reforms will see Interchange fees, which banks are paid by businesses when a card transaction is processed, slashed from 0.8 per cent to 0.3 per cent of the transaction value.
The remaining cost will need to be either absorbed by the business or passed on in the form of higher prices, which the RBA has anticipated.
“Businesses will still incur costs when accepting card payments after surcharging is removed,” said the bank’s statement.
“Those costs can be reflected in a business’s overall pricing, rather than charged as a separate surcharge.”
This admission seems in direct conflict with a statement by the Treasurer, Hon. Jim Chalmers MP, who explained that the goal was about “getting a better deal for consumers”.
A work-around to the card charges is to only accept cash, which is something many hospitality businesses are thought to be contemplating rather than putting up menu prices.
One such hotelier is Simone Douglas, who operates Adelaide pubs the Duke of Brunswick and Port Admiral Hotel with partner Alex Fairgrieve.
They are considering only taking payments in cash at the hotels. Unconventional is nothing new for Douglas, who already serves all gluten-free dishes and shuns both TVs and EGMs and offers that outside-the-square options have “worked quite well for us traditionally”.
Mindful of the coming change, which they estimate will cost at least $80k annually across the two venues, the operators began contemplating options to address the change.
Douglas posed the question on social media and has reportedly received mixed reactions from consumers about the pending change.
The notion of becoming cash only would require the installation of ATMs to ensure patrons have access to cash to pay for their order, and there is the possibility of discounts for cash users.
A number of respondents asked if the hotels had considered what being cash only would cost, but Douglas says it’s not a concern as they already handle cash and have their systems for banking, having change on hand, safes for holding the cash and appropriate security measures.
However, the move would require solutions to the issue of people wanting to use a business credit card or salary package card.
The RBA says removing surcharges will make card payments simpler and increase competition amongst service providers, adding the “small businesses should benefit” from enhanced competition and the ability to shop around for a better deal.
Patrons are expected to benefit from the elimination of fees to use a card, but consumer website Finder recently released survey data stating that 43 per cent of respondents say they were not aware the change to fees was happening.
Douglas suggests the public has been misinformed about the impending changes, appearing to think the fees have been abolished, when it’s closer to reality to say they have simply been reallocated to the businesses providing the goods or services.
She believes the surcharge system was at least transparent about what it would cost people to pay by card, and that now it will all “be hidden in pricing”. Many operators will be forced to raise their prices, but she laments “we’d really rather not”.
Ultimately, the new regulations will likely mean people paying with cash or debit cards will continue to subsidise those using credit cards.
All hoteliers are encouraged to assess the terms of their current terminal provider and review their standing ahead of the 1 October start date.
