TRANSCRIPT

Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Eddie Williams.

ABC Radio South East NSW

Subjects: Merchant transaction fees (least-cost routing); regional bank branch closures

Eddie Williams

It can be a point of frustration when you're paying for a coffee or grabbing a meal. You go to pay by card and you find that you're slugged a surcharge. You're paying more than you thought you might have been. So, what's the reason for these charges when you tap-and-go? And is there a way to reduce the burden both on the small business taking the payment and you, the customer, paying for your long black?

Bruce Billson is the Australian Small Business and Family Enterprise Ombudsman. Bruce, good morning. 

Bruce Billson

Great to be with you, Eddie and your south-coast listeners.

Eddie Williams

Where does this fee, this surcharge, come from? 

Bruce Billson

Well, it comes from a number of places. It's quite interesting. The convenience of just tapping and going for a customer, you think that's pretty easy, I'm done now, I've paid and I'm off to my next thing. But what actually happens in the background is there's an interplay between the financial institution that you bank with, who the card or payment facility is provided by, and then the impact of the merchant, the business that's supplying the goods and service where they're at in that process. So, there's quite a quite a few moving parts going on in the background, and that's what can give rise to charges that will end up being put onto the merchant and in some cases are then passed on to the customer.

Eddie Williams

What sort of burden does all this put on small business? 

Bruce Billson

Well, across the economy, our research has pointed to $800 million of additional costs that don't need to be borne. And in more recent Reserve Bank reporting, they're pointing to it being nearer to $1 billion. That is because people are using payment processes that aren't the cheapest that's available for their transaction.

They're paying for the use of some international cards that have got certain fee structures attached to them that may be passed on instead of what would be a lesser cost routing option that lets you use a cheaper alternative. And those add up to a big number, $800 million to $1 billion worth of extra charges.

And because it's so tough at the moment on small and family businesses that are already having margin squeezes from their input costs going up, just like households have with cost-of-living pressures. Many are in no place to keep absorbing those costs and they'll pass them through to the customers as a surcharge.

Eddie Williams

Least-cost routing. How do you make it happen across the board? 

Bruce Billson

Well, that's the frustrating thing and that's why we've had a bit to say about it. Least-cost routing is available to the vast majority of merchants or businesses that are receiving cards or even online transactions where the card might not be present and you simply pump in your card details and your security number and away you go. There is a way in which those payments can and, in our argument, should be routed through the least-cost payment process so that the merchant and the customer are getting that benefit.

Instead, some of that least-cost routing functionality is not always activated and therefore businesses are busy trying to delight customers, not realising there is a cheaper way of having those payments concluded. Saving money for themselves in terms of costs of running the business and saving customers as well, where there might be a surcharging alternative. 

We're urging the banks that are really central to this, they're the ones that have got the relationship with those small and family businesses, to really lean in and say to those businesses, look, you know, there are cheaper alternatives available for you. Let's get alongside you to activate those. That's in the interests of the business. And the business would see their bank as an ally in their success. And it's also in the interests of consumers. 

Eddie Williams

So, is the onus on the banks? Can government mandate this? Where does the responsibility lie? 

Bruce Billson

Well, there's a couple of things. This is where it gets kind of tricky. There's something called the Payment Systems Board, which sits under the Reserve Bank. They've got some capacity to influence what goes on. We've been basically saying, strong words for the banks to lean in and get on with this hasn't proven to be successful to date. That's why we're urging for a stronger mandate, you know, some specific timeframes.

Some of our banks that advertise that they're big supporters of small and family businesses are sitting back, not letting those businesses know there is a cheaper way for them to run their business in terms of receiving payments from their customers. 

We're saying, come on, you should be looking out for those businesses that rely on that banking relationship and leaning in and helping them out. That's been a glacial process. It's been so slow. We think that's probably because those financial institutions, you know, get a bonus if certain amount of payment values are pushed through those international card providers.

It's a bit like you and I owning a toll road and a sat nav technology and it doesn't matter where you want to go, it pushes you down the toll road through our sat nav. We just don’t think that’s very cool. It's not helpful for the business and certainly not in the interests of consumers. And it's way past time where the banks have been and should have been actively seeking to change that. So that lease-cost routing is activated wherever it's available. 

Eddie Williams

You’re hearing from Australian Small Business and Family Enterprise Ombudsman Bruce Billson on ABC South East. On the topic of banks, the NAB branch at Moruya is going to permanently close in June. NAB at Narooma closed a year or two back. You've made a submission to the federal inquiry that's looking at regional branch closures at the moment. What's the impact on small business when you have these regional closures? 

Bruce Billson

It's absolutely devastating, and I guess the part of it that's most galling for small and family businesses is they've been wooed to be customers of these financial institutions with them saying, look, we're going to be a great ally, we’re your partner in your business, and then they rack off and shut the branch.

That's just not satisfactory. And what it means is for those that need to deposit large amounts of cash, even obtain cash so that they can meet the needs of their customers. And tailored banking services. We all know running a business and thinking about a cash flow loan or working capital loan for your business requires you dealing with a banker that knows something about your business and something about the market in which you operate. And so many of those aspects are lost when the branches are closed. 

One of the things that we've been calling for is a more serious bank closure protocol. At the moment the banks basically signal that they're going to close the branch. They tell the local council and a few others, and then they rack off.

We say if this is really about consultation, why not identify that it's being considered and say to the local business and small businesses and regular community, unless more foot traffic comes through, unless the banking services of the local water authority or the council is met through our services, we might close. You’ve then got a chance to actually do something about it and say to the banks, well, what are you going to do to maintain the level of service and the features and the customer care that were the basis that you wooed us to be customers. What are you going to do to meet that ongoing requirement going forward? Because it's not like that need disappears. 

That's the sorts of things that we've been raising with the Senate committee about a more fair dinkum process of consultation, a more genuine opportunity for impacted communities to adjust, maybe change behaviour to see that branch continue. And a more serious attempt to make sure the customers aren't disadvantaged as a result of that bank closures with proper contingency arrangements, proper plans to make sure services can be maintained in the event they proceed with the bank closure. 

Eddie Williams

Bruce Billson, good to talk to you this morning 

Bruce Billson

Fab to be with you. Take care. Have a great day. 

Eddie Williams

Bruce Billson, the Australian Small Business and Family Enterprise Ombudsman. That proposal around least-cost routing and how to reduce that burden on the tap-and-go surcharge on small businesses and therefore on you as the customer as well.