Payment challengers favour card surcharging
Two of the firms taking on Cabcharge in the market to process payment cards in taxis have defended the 10 per cent surcharge on fares that the latter pioneered and which they, in turn, depend on to make their business model work.
Live Group (which operates the TaxiEpay system) and National Billing (operator of CabFare) explained the rationale for the high surcharge in submissions to the Reserve Bank of Australia. This was in response to a discussion paper on the merits of capping surcharges.
Live called for the RBA to look at the "holistic cost of acceptance".
It pointed out that costs of acceptance, including terminal rental and support costs for small merchants, put the cost of acceptance, measured as a percentage of turnover, at over of five per cent for small merchants and closer to 10 per cent for very small merchants, such as the independent contractors, who largely make up the workforce of taxi drivers.
National Billing described the PSB discussion paper as a "knee jerk reaction to a perceived problem without adequate dialogue and analysis", and called for a more detailed examination of the likely result of a cap on surcharges on competition in the terminal market.
National Billing said there was no evidence of market failure and it should be cardholders that bore the cost of the services provided by the card. Its submission then went on to say that issuing banks failed to fully price the costs of the service being offered to cardholders.
National Billing echoed the theme of the Live submission when it said, "It is [because of] the existence of a service charge for card acceptance that new entrants have emerged."
The Accommodation Association of Australia supported the status quo and rejected suggestions that hotels were "profiteering" from credit card surcharges.
PayPal said that, in principle, merchants should not apply any surcharge on the payment method, but noted they were a reality among some merchants. It called for an "independent authority" to regulate surcharges.
PayPal recommended against any blanket cap or limit on surcharging.
Eftpos Payments Australia Ltd, the supervising company behind the dominant debit card network, said merchants should be free to surcharge, but added that "excessive and blended surcharging has the potential to create misleading price signals and retard the positive effects of the right to surcharge."
EPAL called for greater transparency of merchant fees by card type, with banks disclosing more detail to merchants and to the public, perhaps via more detailed data on fees through the RBA.