Save on your Merchant Service Fees

Save on your Merchant Service Fees

Want an easy way to save on your monthly EFTPOS bill?

Start with getting on top of what drives the cost of Merchant Service Fees.
From there you can explore the different plan structures available.
It’s easy to do, and it could save your business both time and money.

%

of Australian businesses are concerned about Merchant Service Fees

%

of Australian businesses think they could save by shopping around

Why do you pay a Merchant Service Fee?

To understand why you pay a Merchant Service Fee, it helps to understand how electronic payments work first:

How electronic payments work

Your customer swipes, inserts or taps their card at your terminal.

Your terminal tells the acquirer (probably your business bank ) about the transaction.

The acquirer, the issuer (your customer’s bank) and the card scheme (e.g. Visa, MasterCard, etc.) play some data ping-pong to confirm the transaction.

Your bank tells your terminal the transaction is accepted.

Your acquirer puts the money in your account.

That’s a simplified explanation, but it’s enough to demonstrate two things.
1. There are plenty of players involved.
2. There is expensive technology and expertise involved.

Every day in Australia, the ultra-secure EFTPOS system handles more than 6 million transactions¹ via 981,000 terminals². That’s more than 4000 transactions per minute. And what pays for all this, in part, is your Merchant Service Fee.

What is a Merchant Service Fee?

Your Merchant Service Fee is a percentage of each transaction that you pay to your bank or provider to process your transaction payments.

Your bank then pays the others involved, and it’s the issuer that pockets most of the money, thanks to something called the interchange rate.

What is a merchant fee?

What is the interchange rate?

The interchange is set by the card scheme and is paid by the acquirer to the issuer. To work out the interchange rate the scheme weighs up the card type; the rewards offered; the transaction type; the industry you work in; and well, the list goes on.

In total, Visa and Mastercard have hundreds of different interchange rates in Australia, ranging from 0% to 0.88%. And if your customer uses an overseas card, there are even more again.

How this system short-changes merchants

If you check out the interchange rates, you’ll notice something pretty quickly. Some cards – especially high-reward cards – have a higher interchange rate. Yes, you’re paying extra so that your customer’s bank can pay them a reward.

If you think that’s unfair, we’d say you have a fair point.

On top of that, these confusing rates make it nearly impossible to predict your bill each month. Just check out this example

November: 1,500 transactions @ $20 = $30,000 less an average MSF of 0.8% = $240

December: 1,200 transactions @ $20 = $24,000 less an average MSF of 1.5% = $360

So here you’ve done 300 less transactions and turned over $6000 less to pay your bills; but your bank is asking you to pay 50% extra in “Service Fees” on the previous month.

That’s one heck of a business model.

Shop until those fees drop

In 2018 more than 78% of Australian businesses decided to stick with their EFTPOS provider, despite almost two-thirds thinking they could get a better deal.

Call us crazy, but that’s crazy!

There are lots of different ways providers might structure their merchant service fee. And, if you understand the pros and cons of each, you can shop around until you find the right balance of simplicity and savings.

All-inclusive

Interchange ++

Flat rate

Surcharge

An all-inclusive package is what most banks offer. Each month you pay a set amount, which includes a set number of transactions. After that, you pay for each transaction.

Pros

Simple to understand and manage

Cons

 You pay for transactions you don’t use.

  You pay a premium rate if you go above your limit

  You need to forecast your sales accurately – or pay the consequences.

  Most retailers have high and low sale periods, which simply don’t suit this one-size fits all approach.

Interchange ++ breaks down your transaction fee into its parts: The interchange fee; plus the scheme fee; plus the processing fee, e.g. interchange + 0.25% + $0.08.

Pros

Highly transparent

Reflects a true cost

Cons

Complex to reconcile your monthly bill

Difficult to forecast your monthly budgets

You pay more for customers using high-reward cards

Smartpay’s Simple Flat Rate is an excellent example of a flat-rate with just two main numbers to remember: an industry rate for Visa, MasterCard, Alipay or WeChat transactions. And a fixed cent rate for EFTPOS transactions.

Pros

It’s simple to budget

You only pay for what you use

You don’t pay more for customers using high-reward cards

Cons

 Your monthly bill will fluctuate, but it’s easy to work out what it will be and it moves in line with your sales.

Using a surcharge can eliminate your Merchant Service Fees. It simply passes on the fair cost of the transaction to your customer. It’s up to them to choose what payment method they prefer (and are happy to pay for).

Pros

You keep the money from each sale

Surcharge should cover the bill at the end-of-each month

It’s fair to merchants and customers

Cons

Your surcharge must reflect the fair cost by law.*

 

*ACCC regulates surcharging and for each transaction you must stay at, or below, the fair cost. You can’t just apply an average across the board. SmartCharge from Smartpay makes your life easy here. The correct surcharge is worked out in the background and added to each invoice, and goes directly to cover your fees and rental so there is no bill at the end of the month.

If you want to know how to surcharge and keep your customers smiling, we can help.

All-inclusive
An all-inclusive package is what most banks offer. Each month you pay a set amount, which includes a set number of transactions. After that, you pay for each transaction.

Pros

Simple to understand and manage

Cons

 You pay for transactions you don’t use.

  You pay a premium rate if you go above your limit

  You need to forecast your sales accurately – or pay the consequences.

  Most retailers have high and low sale periods, which simply don’t suit this one-size fits all approach.

Interchange ++
Interchange ++ breaks down your transaction fee into its parts: The interchange fee; plus the scheme fee; plus the processing fee, e.g. interchange + 0.25% + $0.08.

Pros

Highly transparent

Reflects a true cost

Cons

Complex to reconcile your monthly bill

Difficult to forecast your monthly budgets

You pay more for customers using high-reward cards

Flat rate

Smartpay’s Simple Flat Rate is an excellent example of a flat-rate with just two main numbers to remember: an industry rate for Visa, MasterCard, Alipay or WeChat transactions. And a fixed cent rate for EFTPOS transactions.

Pros

It’s simple to budget

You only pay for what you use

You don’t pay more for customers using high-reward cards

Cons

 Your monthly bill will fluctuate, but it’s easy to work out what it will be and it moves in line with your sales.

Surcharge
Using a surcharge can eliminate your Merchant Service Fees. It simply passes on the fair cost of the transaction to your customer. It’s up to them to choose what payment method they prefer (and are happy to pay for).

Pros

You keep the money from each sale

Surcharge should cover the bill at the end-of-each month

It’s fair to merchants and customers

Cons

Your surcharge must reflect the fair cost by law.

ACCC regulates surcharging and for each transaction you must stay at, or below, the fair cost. You can’t just apply an average across the board. SmartCharge from Smartpay makes your life easy here. The correct surcharge is worked out in the background and added to each invoice, and goes directly to cover your fees and rental so there is no bill at the end of the month.

If you want to know how to surcharge and keep your customers smiling, we can help.

Time to start shopping for a better deal?

If you want to find out how to master your Merchant Service Fee; and save time, money and hassles with Simple Flat Rate or SmartCharge, get in touch with the team at Smartpay today.

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