Retailers are hurting right now. Consumer spending is down and the price of doing business has gone up. But some price increases are flying under the radar.

Payments are a gold mine for banks and card schemes, but over the years they have become a leaky boat for merchants. Last month, VISA increased its interchange fee from 0.20% to 9 cents per transaction for in-store transactions.

When you look at a $15 coffee and cake purchase, it used to cost 3 cents for the transaction. That will rise to 9 cents. All those small daily purchases – which we know will impact a lot of small to medium retailers – will be impacted hugely. 

When it comes to interchange fees, discretion resides with the payment provider as to whether or not they absorb them. If history is anything to go by, we know they will. Most retailers will therefore combat the problem with higher surcharges, simply because they see no other way forward. And the customer will pay more. 

For now, many consumers remain blind about how much they’re actually paying in surcharges. In a recent national study, almost half of Australians said they don’t know when they are being surcharged or what for. Those savvy enough to notice, however, won’t be happy, and anything that turns customers away in the current economic environment is a big concern. Personally, I’d like to see surcharges itemised on receipts, because if customers knew better, they would undoubtedly want better. 

The good news is that retailers already have more power than they realise to educate their customers and take back control of the surcharging problem. For too long the cost of payments has been accepted as part of the price of doing business, but new payment alternatives make it possible for that to change today. Isn’t it time retailers took a stand against the banks and card schemes?

Open Banking and ‘Pay by Bank’ alternatives

Through recent Open Banking regulation, consumers can access money directly from their bank when paying for goods or services – no middleman required. Until now no one has given them the technical ability to do this because everyone involved in the payments system – from major card schemes, to banks, to Apple – all profit from existing systems, with merchants and consumers footing the bill.

In Europe where Open Banking was pioneered, this has already changed. Disruptive technology companies are delivering what the ‘big guys’ won’t. According to a Statistica report, the growth of Open Banking is so rapid that Europe is expected to see nearly 64 million users in 2024. That’s an increase of over 400 percent in just four years.

In Australia, our new Consumer Data Right (CDR) legislation puts us ahead of other regions globally. The CDR gives consumers the ability to share their personal data with whomever they choose if they feel that what they receive in return will benefit them. Banking is the first industry to access the CDR, so in the short term we will see it used in areas like payments and financial data. In the longer term it will be used by every industry to help consumers better leverage and control their data.

Waave is the first business to use the CDR and Open Banking technology to launch both B2B and B2C payments in Australia. Its Pay by Bank technology bypasses traditional cards and allows consumers to pay instantly, directly, and securely via their bank – either through a button at the online checkout or a QR-code in-store.  For merchants, Waave is up to 80 percent cheaper than card payments, while providing instant authorisation, faster funds settlement and no dishonour charges or chargebacks. Other companies are also quickly emerging in the Open Banking space, which is a great thing because it speaks to the possibilities of the technology and the market demand for change. 

When it comes to payments, Pay by Bank creates an opportunity for retail merchants to talk more frankly about surcharges and encourage their customers to select a cheaper alternative to card schemes. It also vastly enhances the payments experience, is more transparent, there are no nasty credit pitfalls, and it removes the inconvenience of entering card details.

Don’t let sneaky payment fee hikes damage you financially or damage your reputation among your customers. By making the Open Banking switch, retailers can resume control over payments and give customers what they never knew they were missing.

Ben Zyl is co-founder and CEO of Waave.