At a time where the cost of living remains stubbornly high, businesses are feeling the pinch more than ever. To hedge against this, many are adopting surcharges and forwarding those card processing fees onto consumers—putting more pressure on everyday Australians. It’s a ripple effect that only hurts the consumer in the end.

We’re seeing this in the hospitality sector, where 40% of cafes and restaurants levied surcharges, compared to 25% in May 2022 when inflation started to rise. Meanwhile, 41% of pubs and bars surcharged compared to 29% a year earlier. Online retailers face the same challenge with traditional card processing fees but are only a few short clicks away from being replaced by a competitor who doesn’t surcharge.

The increase in these surcharges is, in part, a symptom of a complex and costly ecosystem of organisations who facilitate—and take a cut from—payments. In fact, fees from this ecosystem make up a significant contribution to payments costs, with net fees across the major card networks amounting to around $1.2 billion in 2021/22, according to the Reserve Bank.

PayTo, built on the New Payments Platform (NPP), provides a viable alternative to this growing pain. It’s providing real-time settlement for transactions, greater cash flow for businesses, and leverages a consumer’s bank’s digital banking security and biometrics—all at a fraction of the cost of traditional card payments.

Changing consumer priorities

Consumers are becoming increasingly selective over who they shop with online as cost of living pressures continue to bite at their wallets—something ecommerce players should not take lightly.

The online shopping experience lends itself naturally to the convenience of competition. Consumers have largely (and perhaps begrudgingly) accepted paying a surcharge at the point of sale in-person at bricks and mortar establishments as the convenience of tapping a card or phone has overtaken the place of cash, particularly for small value purchases. Plus backing out of the shop and walking down the street to a competitor is a whole effort in itself. But in the world of ecommerce, people simply click a back button and they can be on a competitor’s website buying the same product for cheaper in mere seconds.

Not only this, but not using real-time payment mechanisms like PayTo is eroding your margins. For example, say you’re an online retailer and in the weeks leading up to Christmas you clear $1 million worth of sales. Without PayTo, your business may pay up to $15,000 in card processing fees. 

Moreover, for retailers who average a basket size between $50 and $150, they could be saving between 60 and 90 per cent on transaction fees by switching to PayTo—for higher value purchases the savings continue to grow. That’s immense cost savings waiting to be tapped into, yet many of the major online retailers are yet to embrace the benefits of the NPP.

Safe and trusted payments are now table stakes

Beyond cost, the increasing prevalence of fraud and scams has put consumers on high alert, with almost three quarters (73%) of Aussies saying they have become more concerned about scams over the last 12 months—representing a 16% increase in awareness since 2022. And rightly so, with data published by the Australian Competition and Consumer Commission (ACCC) revealing financial losses via scams rose by 80% to $3.1 billion in 2022

The threat of fraud and scams has never been greater, and businesses need to factor this into the payment methods they make available to their customers. Ultimately, consumers want to be able to trust the merchant they’re doing business with.

This is only going to get worse for businesses and consumers in 2024 as bad actors become more sophisticated with open source generative AI (GenAI) tools. GenAI presents an extraordinary threat because it has the potential to scale and accelerate the design and dissemination of payments scams by an order of magnitude. 

Adopting PayTo provides an immediate layer of protection for you and your customers. This is because it operates based on a pre-authorised agreement between your business and the customer via their bank. Not only does this mitigate the risk of fraud, but it also creates a streamlined payments experience for the customer, whilst significantly reducing transaction fees for the merchant. 

Another benefit of PayTo is that no sensitive customer payment details are stored with the merchant, giving consumers confidence that their data is safe with their bank, whilst reducing PCI compliance risk for merchants.

A new world awaits

As we approach 2024, retailers face a dual challenge of rising costs and declining consumer trust. The way value flows through the economy is changing, and without evolving with that change, retailers risk falling behind. 

The silver lining is that we’re starting to see adoption of PayTo kick off, and earlier this year, Zepto partnered with Wpay to launch its PayTo offering. Forward-thinking businesses who think innovatively about the application of PayTo beyond a modern and cost-effective direct debit to new use cases across eCommerce, loyalty programs, and more, will unlock value by tapping into this emerging payment solution. We’re seeing immense interest in (and excitement for) new and innovative use cases across the industry—use cases that will only bring mutual benefits to both businesses and consumers.

The macroeconomic environment presents an urgency for retailers to manage their underlying costs accordingly. PayTo represents this solution and can help retailers relieve cost pressures, and it benefits both sides of the transaction. After all, retail is a margin game, and those who can manage and grow their margin whilst driving customer loyalty will ultimately survive and thrive.

Chris Ponton Dwyer is senior enterprise sales executive at Zepto.