When a customer swipes or inserts their debit, or EFTPOS card on your terminal, they don’t incur any additional costs from the action, and neither do you. However, when a customer chooses to use a contactless method and/or credit card, someone has to field the fee that banks have implemented. More often than not, that someone is the business owner.
But that doesn’t mean you can say goodbye to contactless; you can choose to turn the Merchant Services Fees into a surcharge that’s added automatically onto the customer’s total transaction. The question is, what are the benefits (and potential drawbacks) of implementing this practice?
Let’s take a look.
The Benefits Of Contactless Payment Surcharges
New Zealand is the leader in the world’s EFTPOS market, with over 75% of Kiwi transactions taking place electronically. Those payments are now starting to shift towards contactless, and that means businesses need to keep on top of the desires of their customers, so they need to go contactless.
For The Merchant: Your Budget Won’t Take The Hit
The most obvious benefit of transferring some of the surcharges to the customer is the protection of your business expenses because you won’t be taking the financial hit. If you hire an EFTPOS machine or pay any other regular expenses, it can all add up very quickly, so it’s in your best interest to keep any additions off the table.
For The Merchant: Contactless Attracts Business
Even if, as a merchant, you choose to take on the entire cost of providing contactless payments, you will still enjoy an increase in business. According to research conducted by Paymark and the TRA, utilising contactless methods has shown a doubling in sales compared to those who haven’t, as well as double the amount of overall transactions.
For The Customer: Elevates The Experience
In the world of customer service, a smooth experience typically goes hand-in-hand with a fast experience. Contactless payments enable faster interaction, and the “tap and go” method has improved store experiences all over the country. More and more Kiwis are migrating to frictionless payment methods every day because it’s fast, easy, and secure. Customers are now able to enjoy a “wallet less” existence with apps like ApplePay or WeChat Pay, where convenience is the top priority, and a card isn’t even necessary. Therefore, a small fee for each transaction is, in the mind of the customer, usually worth it.
Furthermore, more and more people are using Scheme debit cards (i.e. VISA Debit, MasterCard Debit, etc.) over EFTPOS cards thanks to the former’s features. On top of being able to do everything that an EFTPOS card can, like withdraw cash or pay for purchases electronically, having a Scheme debit card also works like a credit card and lets people pay online or by phone as you would with a Credit Card.
For The Customer: Secure Payments Are Worth It
In an age of data fraud, black-hat hackers, and run-of-the-mill thieves, the security of any transaction is paramount and Contactless payments undergo extra encryption to protect a customer’s card data.
Whether the customer fields this charge, or the business does, both can be assured that the transaction is a secure one.
The Drawbacks Of Contactless Payment Surcharges
Even though there are a variety of benefits, there can also be some potholes depending on the individual circumstances of a business or customer.
For The Merchant: Fees Can Vary
Depending on the industry your business is in, a business may charge towards the higher end of the merchant fee spectrum. If you choose to surcharge the entire amount to your customers, they could flinch at the amount. If you choose to surcharge only some of the fee, you still have to field an additional cost every time someone makes a contactless transaction.
For The Merchant: Customers Resenting The Surcharge
The possibility exists that customers could notice the surcharge and resent it being added to their transaction. Despite the prevalence of these surcharges, people might become skeptical, so it’s down to you to assess the climate of your industry. Many local businesses find this to be a big hurdle, as their customer base chooses them for the convenience and experience alike. Passing the cost along could bring challenges to that local or boutique image.
For The Merchant: Convenience At A Cost
Despite the ease of transaction that comes with a Contactless payment, the surcharge that many businesses add onto prices to recover costs can put a damper on that convenience. There are rules around surcharging, and the surcharge amount must bear a reasonable relationship to the Merchants cost of accepting the nominated cards for Payment. The merchant cannot discriminate between different cards (i.e. charge for one scheme but not the others) and they should always check and comply with the procedures set out in their Merchant Agreement. The merchant must also display adequate signage of the surcharge amount so that the customer is fully informed prior to proceeding with their transaction.
Final Thoughts
To surcharge appropriately, you must:
Be Transparent: Inform customers about the surcharge and their options ahead of payment.
Set Reasonable Surcharges: Ensure surcharges do not exceed the additional cost of accepting the payment method, typically the merchant service fee.
Offer an Alternative: Provide at least one payment method that does not incur a surcharge.
Appropriate surcharges can vary for different types of payments (e.g., contactless debit vs. credit). They can also be the same for multiple payment options of a similar type, but it’s important that the surcharge reflects the relevant revenue shares and is not simply an average of different costs.
By adhering to these principles, you can ensure fair and compliant surcharging practices that maintain a positive customer experience and support your business’s financial health. For further clarity, check out the Commerce Commission’s advice on how to appropriately apply surcharge in New Zealand.
If you’re debating your choices, Skyzer is there for you. New Zealanders are moving towards a fully contactless existence at a rapid rate, and it’s important to keep up. If you’re currently not satisfied with your current Merchant Services Fees – get in touch, we’re dedicated to tailoring the perfect payment solution suited for your business.
If you currently looking into adding surcharging, watch our YouTube video and also refer to the notice below:
Skyzer is one of the leading experts in everything EFTPOS-related. From software compliance to portable EFTPOS machines in New Zealand, our team can keep you informed and ready to go.
