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Should your business accept credit card?

Lady paying for pastry

Kiwis have always loved paying by card. Each of us make an average of 358 card transactions in a year. Since EFTPOS was introduced in mid 1980s it’s been the dominant way to pay here. But the tide is turning with credit card spending increasing.

In 2015 we made an average of 2.7 EFTPOS transactions for every credit card transaction – in 2018 this went down to 1.5 EFTPOS transactions for every credit card transaction.

The convenience and speed of contactless payments is helping fuel this trend. But to accept contactless, you’ll need to enable credit cards. With the holiday season coming up, now is a good time to review the payment methods your business accepts.

Weighing it up

A key thing to consider is your average ticket item. Kiwis have a preference for purchasing bigger ticket items with credit cards with the average credit transaction coming in at $64. This compares to $39 for cheque or savings transactions. It makes it easier for customers to spend more if they have access to the funds in their credit card, rather than just the current balance in their cheque or savings account. If your average sale is over $50 (or you want to get it up over this) it might be worth enabling credit. 

You should also consider whether your products or service are occasional or unplanned purchases. New Zealanders are prefer to use credit cards for occasional expensive items and large unexpected bills. In contrast, we prefer EFTPOS for day to day purchases.  For example, if you are a café with cabinet food doing mostly $10 coffee and cake, you might be ok with just debit. However, if you want to expand into catering orders for parties for example, it would be worth considering accepting credit card.

Got lots of overseas customers? If you are in a tourism-related industry, or a tourist area, it’s a no-brainer to accept credit cards. Most domestic cashflow cards don’t work in other countries. To avoid limiting your customers to the cash in their wallets, you should accept credit card. Plus, Kiwis prefer credit card for overseas travel so you can assume the same applies for visitors to our shores.

Another factor is speed of service. Would keeping your queue moving help overall sales? Say you’re a busy fish and chip shop with queues out the door on Fridays – processing payments faster might help you serve more customers in an evening. One way to do this is to accept contactless payments – and do that you’ll need to accept credit cards.

Transaction data infographic

How much will it cost?

EFTPOS swipe or insert transactions don’t cost you the merchant anything – apart from your monthly fee to connect to the Paymark network. Credit cards however will have Merchant Service Fees (MSF) for each transaction. These fees usually range from 1-4% of the transactions, and cover the cost of the acquiring bank, interchange and the scheme fees (eg. Visa or Mastercard).

You’ll need to talk to your merchant bank to enable credit cards and to find out what the costs will be.  Some merchant banks offer a simple flat percentage fee for all credit cards which means you’ll know exactly what to expect at the end of the month.

When you accept credit cards you can accept contactless – but you don’t have to. Depending on your business this could cost you a lot more as any tap and go transactions route to the scheme (visa or Mastercard) and so aren’t free for you even if the customer is paying from their cheque or savings account.

Alternatives to cards

Emerging payment methods like mobile wallets and buy now pay later accounts are disrupting the credit card market. For example, if you have Chinese customers consider adding Alipay and WeChat Pay acceptance.

An alternative to using a Union Pay debit or credit card, users simply scan a QR code with their mobile phone to pay directly from their linked bank account. A simple percentage fee is charged – often lower than what you’d pay for accepting a credit card. With the major Chinese holiday Golden week and New Zealand’s peak summer season coming up, it’s a good time to check you have the right payment methods to welcome Chinese visitors. Smartpay offers this option – find out more about Alipay and WeChat Pay.

Our surcharge solution can help you recoup the costs of acceptance.

If you are wanting to accept credit cards, but are concerned about absorbing additional costs into your business, consider passing on the cost by adding a surcharge. This is a small fee you add on to a customer’s bill to help cover the cost of accepting an electronic purchase.

Done right, Surcharging is simple, transparent and fair to all. It’s a common practice in many businesses from bakeries to taxis.  It’s so common customers often miss it, but you won’t miss the difference on your balance sheet.

Smartpay terminals can offer you with the ability to surcharge your customers for credit cards when they are swiped or inserted and for contactless payments. Get in touch to add on a surcharge for free or learn more about surcharging here.

For more insights into payment trends in New Zealand read The Face of New Zealand Payments, Paymark

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