Australia’s fifth largest merchant acquirer, Tyro, is continuing to sign new SME customers despite the interruption to normal business caused by the Covid-19 health crisis.
Managing director Robbie Cooke said the company had widened its merchant network since early March when lockdown restrictions took effect across Australia.
“We haven’t reduced the size of our marketing team in any way in the last two months,” Cooke told Banking Day.
“We’ve had approaches from merchants, both small and large businesses, who have signed up with us – albeit at a much slower rate than before Covid-19 took over.”
Tyro is the leading challenger to the four major banks in the rapidly growing merchant services market, with a terminal fleet exceeding 51,000.
While the majors each operate fleets at least three times larger than that, Tyro has managed to win market share consistently in the last five years through a combination of aggressive pricing and in-house product innovation.
Tyro was the first Australian bank to offer least cost routing on contactless debit card payments – an innovation which delivered early savings to retailers and other merchants linked to its network.
The company’s least cost routing offer remains a customer acquisition lure as the major banks, particularly CBA and Westpac, struggle to highlight the benefits of the service to their SME clients.
One of the big concerns about Tyro among investment analysts is whether transaction volumes are likely to recover after the health crisis because of the company’s heavy exposure to merchants in the restaurant industry.
Around 44 per cent of Tyro’s transaction business originates from owners of restaurants or other businesses in the wider hospitality sector.
Some industry groups, including Restaurant and Catering Australia, believe that up to 25 per cent of Australia’s 44,000 licensed restaurants face being upended permanently by Covid-19.
Cooke believes the federal government’s swift moves to provide financial support for Australian businesses is likely to limit the fallout.
“The government should be commended for the small business support package which I think will protect many of our customers,” he said.
“I think the business failure rate in Australia will be a lot less than what some of the doomsayers are saying out there.”
Apart from the impact that SME failures might have on transaction volumes, analysts have also focused on the risk of merchant acquirers incurring higher chargebacks to cardholders for goods and services not delivered by retailers before they go out of business.
“The SME sectors we’re big in – hospitality, retail and health – do not have a high degree of forward delivery risk,” said Cooke.
“We think in some industries that risk is there – but we’ve got a limited merchant cohort where that would be a significant risk for us.”
While Cooke noted the importance of continuing to grow Tyro’s network, he said the bank was devoting most of its resources and staff to help existing customers get through the negative cashflow effects of the lockdown.
Tyro has waived rental fees on inactive terminals for the duration of the lockdown and is involved in community programs delivering support to small business owners.
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