Merchant services guides and resources

Many merchants choose a single Payment Service Provider (PSP) and then find themselves at a disadvantage if they can’t dynamically keep up with changing customer preferences, e.g. supporting additional currencies and new payment methods. 

The reality is that there are many compelling reasons to work with more than one PSP:

1. International sales - to accept local currencies and payment methods in different countries. This may entail going with PSPs the primarily service specific markets.

2. Cost reduction - to route transactions to the lowest cost PSP. Different PSPs charge a range of prices for specific payment methods and transaction types. With two or three PSPs, it is possible to choose the lowest cost PSP for each payment type. This can also be the case for international sales where PSPs in specific markets may have better pricing than a global PSP. Single providers can be convenient by may lead to increased overall costs.

3. Independence - to avoid being locked in and mitigate the risk of fee increases. If the merchant has only one PSP then there is a risk of becoming ‘locked in’ with a potentially high cost to change PSPs (or add another) later. In this situation there is a possibility that the incumbent provider may gradually increase transaction fees over time until the merchant feels some real pain on their margins. Having at least two PSPs mitigates this risk and is likely to keep fees lower over time.

4. Contingency - as a backup if the primary PSP goes down for a period. 

5. Customer preference - to ensure a customer’s preferred payment methods can be offered. A merchant may lose sales if it does not accept the preferred payment method of the customer. It may be necessary to work with multiple PSPs to be able to accept all the payment types customers wish to use.

6. Omni-channel - to ensure a set of payment methods can be consistently accepted both online and in-store. It may be necessary to use more than one PSP in order to consistently accept a set of payment methods both online and in-store.


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The Reserve Bank of Australia (RBA) has established changes to card payments regulations banning excessive payment surcharges and providing new powers for the Australian Competition and Consumer Commission (ACCC).

This new standard affects the amount that merchants can surcharge for card transactions. The standard applies to all business/merchants that impose payment surcharges on payment transactions regardless of their size.  

If a business chooses to impose a surcharge on its customers for making a payment using a credit, debit or prepaid card, the level of the surcharge must not be excessive. 

A payment surcharge is considered excessive if it exceeds the cost of acceptance.

You do not have to impose payment surcharges on accepted payment methods. If you do not impose any payment surcharges on your customers, the ban will have no impact on you.

The full ACCC Guidelines can be viewed online.

The new law covers surcharges on typical card payment methods:

  • Eftpos (debit and prepaid)
  • MasterCard (credit, debit and prepaid)
  • Visa (credit, debit and prepaid), and
  • American Express companion cards (issued through an Australian financial service provider, rather than directly through American Express).

If you choose to impose a payment surcharge on a payment method covered by the ban, the amount of the surcharge must not exceed your cost of acceptance for that payment method.

Your costs of acceptance are provided to you on a statement from your bank (acquirer) or payment services providertypically shown as a percentage figure amount.

For most businesses, the fees include:

  • merchant service fees
  • fees paid for the rental and maintenance of payment card terminals
  • any other fees incurred in processing card transactions, including cross-border transaction fees, switching fees, and fraud related chargeback fees (but not the cost of any actual chargebacks).

You can also choose to pass on additional permissible costs, but you are required to calculate the permitted surcharge yourself.

Additional permissible costs paid to other providers are:

  • gateway fees paid to a payment service provider
  • the cost of fraud prevention services paid to an external provider
  • any fees paid for the rental or maintenance of card terminals paid to a provider other than your bank or payment facilitator
  • the cost of insuring against forward delivery risk.

These must be able to be verified by contracts, statements or invoices.

Businesses cannot include any of their own internal costs when calculating their surcharges (for example, labour or electricity costs).

Calculating your Cost of Acceptance


Source: ACCC

If your costs of acceptance are charged to you in percentage terms, it will typically be appropriate that any surcharges you impose will also be expressed as percentages.

The ban does not prevent you from imposing a payment surcharge as a flat or fixed fee, however, you will need to ensure that the amount of the surcharge does not exceed your cost of acceptance for any given transaction.

If you wish to impose a single surcharge across multiple payment methods, you must set the surcharge at the level of the lowest cost method - you can’t average across the methods.

Example

If your average cost of acceptance for Visa Debit is 1%, for Visa Credit is 1.5%, and for American Express is 2%, you would only be permitted to charge the same level of surcharge for each payment method if it was 1%, as that is the lowest of all payment methods. You would not be allowed to use an average of the three figures.

The ACCC is responsible for enforcing the ban and can take the following actions:

  • issue an infringement notice with penalties of up to $12 600 (body corporate) or $126 000 (listed corporation)
  • take court action seeking pecuniary penalties of up to $1 358 910 per contravention, injunctions and other orders.

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