Australia is fast becoming a cashless society, and Covid has only accelerated this trend. But as Aussies pull out the plastic more often, is it small businesses who are paying the price? And could surcharging be a ‘vaccine’ for the escalating cost of card transactions?

Australia is becoming a cashless society

In 2010, cash was king. Two-thirds of all transactions were cash, while only one-third were card. Fast-forward to 2019, and that equation has flipped on its head with card transactions making up 63%. (Source: RBA)

At the same time, compared to 2016, the value of cash payments was down 38%, in-person cash payments down 30%, and the number of customers who never use cash was up 60%.

And then came Covid, and cash sales fell off a cliff.

Covid has accelerated the decline of cash

Thanks to lockdowns and concerns about the hygiene of notes and coins, cash sales all but disappeared in 2020.

“During Covid, what has unquestionably occurred is that people have stopped using currency entirely, or reduced it significantly,” CEO of Australian Royal Mint, Ross MacDiarmid (source: Guardian)

In a post-covid Australia, we can expect cash sales to rebound a little, but how much? With less demand for low-value banknotes, less cash being deposited, lower ATM withdrawals, and record online shopping, it’s clear Covid has changed the way we shop and pay for good.

Small retailers are paying a high price

For small businesses and retailers, this shift towards cashless payments presents a challenge. Because for every one of those card transactions, there’s a cost for the business (aka the merchant service fee) and the more card transactions a business processes, the more those fees can eat into profit margins.

And it’s small businesses who are hit the hardest by merchant service fees.

When the RBA crunched the numbers for big businesses (those with an annual card turnover of greater than $10 million), the average cost of acceptance was less than 1%. For small businesses with turnover less than $100,000, that average cost got up well above 1.5% – that’s at least a 50% increase (Source: RBA)

For many smaller merchants, the cost of accepting debit card and credit card payments and mobile payments have become one of their highest operating costs outside of rent and payroll.

Read more: Is it time small businesses add a surcharge?

^Source: Reserve Bank of Australia

***

This article has been republished with permission from SmartPay.

If you enjoyed reading this article and would like to be notified when future articles are posted, please sign up for our email newsletter.

Are you interested in reading articles on a particular payments topic, company, payments industry executive or author? Click the search icon, it’s that magnifying glass on the top right-hand side of the website, and type in the keywords that interest you. You will then be presented with a list of any articles that match your search criteria.