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Published 24 June 2013 11:09, Updated 25 June 2013 07:24
Jost Stollman, chief executive of Tyro Payments, says the increases are unjustified and untimely. Photo: Steven Siewert
The increase in merchant fees charged by credit card and eftpos providers is a product of the concentration of power among the banks and major card providers, says Tyro Payments chief executive Jost Stollmann.
Stollmann, who established Tyro as the first new independent entrant in the highly concentrated eftpos payment industry, says the banks have used their market power to increase revenue earned from merchant services.
“These increases are unjustified and untimely and point to the concentration of competition in the payments solutions,” he says.
Stollmann’s comments come on the back of the Reserve Bank of Australia’s Banking Fees in Australia report, released last week, which highlights that banks have increased the income on fees they earn from businesses, while reducing the income they earn from households.
Merchant service fee income increased 8.2 per cent in 2012, according to the RBA report; on average merchant services fees have been growing 4.9 per cent per year between 2006 and 2011, according to the report.
The increase in merchant service fees from businesses ranks second behind income earned from loans, which increased 10.8 per cent in 2012 and has increased 12 per cent between 2006 and 2011.
In comparison, banks have decreased the 2012 fee income they have earned on individuals’ deposits (-3 per cent), maintained a zero per cent increase on fee income they have earned on personal loans, and slightly increased the income they have earned on individual credit cards (1.5 per cent).
“Targeting merchants is less of a headline fee as mortgages – when the banks have pressure from households to reduce mortgages, then they make the difference up from businesses. You can see that in the numbers,” Stollmann says.
Chief executive of the Australian Bankers’ Association, Steven Münchenberg, says the increase in fees earned by banks on loans and merchant fees highlighted in the RBA report reflects the overall increase in transactions and loans among small and medium businesses in the last year.
In fact, Münchenberg says, merchant fees as a percentage of credit card and eftpos transactions have declined since 2006, except for in the 12 months to 2012 where there was a slight increase.
Stollmann says banks are making up for the lower incomes they are earning on households by charging retailers the maximum amount allowable under the RBA’s cap at a time when small and medium retailers are struggling the most.
“Almost 65 per cent of Australian business, or 200,000 companies, are absorbing all the service fees imposed on them and not passing them on to the consumer, as they need to remain competitive on price, especially with a record number of consumers purchasing online overseas in the last 12 months,” Stollmann says.