Anna Bligh interview on 2GB Drive discussing cash payments and surcharging  

Chris O’Keefe   

When it comes to cash, 424 bank branches have closed, or 11% of Australia’s overall branches. This included 122 branches in regional and remote areas plus a further 718 ATMs were shut down or removed during the same period. So they make it hard for us to use cash, both businesses and banks, then we use the card to pay for whatever the good or the service is, and they charge us extra to use the only method of payment available to us. Look, this doesn’t wash with me, but Anna Bligh is the CEO of the Australian Banking Association and she’s on the line hopefully to explain a little bit about why this is the case. Anna, thank you for your time. 

Anna Bligh   

Good afternoon. How are you? 

Anna Bligh   

Well, thank you. So how much does it cost a bank to process a card transaction? Well, it’s a relatively small amount. Basically, banks use either Visa, MasterCard, or EFTPOS and the cost of that to the customer, that is the small business customer, ranges from 0.34%, which is 34 cents in the dollar, sorry, 0.34 cents, to 0.51. So it’s, it’s relatively small. I’m pleased you’re raising this because one of the things that not many people realize, is this surcharging is allowed by the Reserve Bank and the fees are set by them and then the ACCC, as you said, can enforce them. There are two really important things to be aware of. One, small businesses cannot surcharge for more than it costs them to process the payment. So, they can’t make a profit out of surcharging. And secondly, they actually can’t apply a surcharge if they don’t accept cash. So, they have to accept cash if they want to be able to surcharge. I suspect a lot of small businesses aren’t aware of that, because I’ve certainly seen as you’ve just said, places where they don’t accept cash and then they surcharge the card. So, there’s a lot of rules out there for small businesses. I’m not criticizing them, staying ahead of them may not be always easy. But certainly if any of your listeners are going to a regular small business in their local area and being surcharged in an environment where there’s no cash accepted, that’s not something that’s permitted.  

Chris O’Keefe   

Okay so it’s 0.34 of a per cent to 0.5 of a per cent, that’s roughly the cost to the bank, to process a card transaction. Is that right? 

Anna Bligh   

Well, the bank makes a small margin on it.  

Chris O’Keefe   

Well how small is small? 

Anna Bligh   

Well, it would vary from bank to bank, but we’re talking very small. But these are businesses that if they invest, they build the payments networks, they invest in keeping them safe and secure. For the small business and for the customer. All these things are invisible, Chris, but that doesn’t mean they’re free. Someone has to build these networks, someone has to pay for their POS terminals, someone has to make sure that hackers and scammers aren’t getting into the system. So, it is important that they do keep investing. And like anyone investing in anything, they do want to see some return to a relatively small contribution to their overall profit. But it is an important part of the business. And yes, they do make a small margin, just like the small businesses are making a margin. 

Chris O’Keefe   

Is it not just the cost of doing business and a service that the banks do provide small businesses and wrap them up in? I don’t know, small business loans, and a whole bunch of other services that the banks do provide? Do they really have to pass it on? 

Anna Bligh   

Well, there are different arrangements that banks come to with their small business customers. You’re right, a bit like your telephone package, you know some of them roll that up into other offers. It might be a line of credit you pay for, then you rent the terminal at a different price or you get a different pricing arrangement depending on what suits your business. So, there’s a choice for small businesses which option they take. But I do think it’s fair enough, frankly, as if you’re a customer, when you go to pay for your cup of coffee or whatever it is, you know what the price is so you don’t get a surprise. There are lots of small businesses out there who are paying these fees and they include that into the cost. You don’t see it separated out but it’s just like any other cost of doing business. I don’t see in the price of my coffee, how much I’m contributing to the small business owners electricity bills, water bills, rent bills, but quite reasonably, they include all of that in the cost of the goods or the services that I’m buying. And I as a customer know what I’m paying. I don’t think I’m going to pay $4.50 and then find out I paid $4.68 or something like that. 

Chris O’Keefe   

But the difference is, I think the Reserve Bank said it’s about $1 billion a year that Australians pay in merchant fees, and I think what gets under people’s skin is the fact that it is very clear, Anna Bligh, and you can say that the banks, your members, are saying oh, well, not many people want to use branches, and cash is a thing of the past, yada, yada, yada. But if the banks make it harder for us to use our cash and access our cash, and then in the same breath, charge a merchant fee, it feels a little dodgy. 

Anna Bligh   

Well, I’d say a couple of things to that. Firstly, no bank thinks that cash is a thing of the past, cash is in decline. But most banks believe it’s going to be around for a very long time, in smaller amounts, but people are going to still want it, they’re going to still need it, and that banks will certainly be in the business of providing it. But they won’t be the only ones as they never have been. They contribute to Australia Post to give cash out. Supermarkets still give cash out. Australians are very well served when you look at the rest of the world in access to cash. And I think they’re going to continue to be for a long time sorry. 

Chris O’Keefe   

Sorry 424 branches have closed or 11 per cent of Australia’s overall branches have closed in the last 12 months to June 2023. 718 ATMs were closed or removed in that same period. I went to the bank the other day and asked for $1500 out to pay a painter who was at my house and the teller asked me what I needed it for. I’ve had other instances, we’ve talked about it at length, where people have gone in and asked for $2000, $3000, $4000 and the banks have said, oh hang on, you’ve got to put a request in 48 hours prior. You can’t honestly say that Australians are very well served in accessing cash anymore. 

Anna Bligh   

It’s certainly not as convenient as it might have once been when we were all using it to pay for everything. But we are changing. Most people will tell you and I know it’s not everyone, but overwhelmingly 98% of all transactions are now done not using cash. It’s either online or using a card. So, banks have got to make sure they’re protecting both those people who want to use cash, as well as the overwhelming majority of Australians who are jumping into online banking. 

Chris O’Keefe   

Sure, but are they protecting them? People who want to use cash, 718 ATMs, 424 bank branches, especially in regional and country parts of Australia, where really you’ve got to drive a long, long way to go to a branch Anna Bligh. 

Anna Bligh   

As I said, in most of those places Australia Post provides cash out. Most of them have some form of access through either an ATM or a supermarket. And I should say now, if people were using those ATMs, they’d still be there. What we’re seeing is a massive shift into the online environment. But we’re maintaining the cash system, not in the same way as when we used it 100 per cent of the time, and growing and maintaining and protecting the online environment. It’s not an easy time to get to be straddling all of that, but if we can just go back to the issue around fees, I did want to say that merchant fees every year for the last 10 years have been coming down. The hard thing for us as customers is when you go up and you tap and go, what happens next is entirely invisible to you. But it doesn’t mean it’s free. Someone has to pay for it. Generally it’s banks pay for all the infrastructure and then effectively the merchants rent to be using it. 

Chris O’Keefe   

Anna Bligh, I appreciate you jumping on. I know you said it’s a tough time to be straddling the digital and the cash sphere but 32.5 billion dollar record full year profits for our big four banks. It’s not that tough is it? Appreciate you fronting up anyway. Thanks a lot. That’s the Chief Executive Officer of the Australian Banking Association Anna Bligh.  

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