Understanding Payment Processing Fees for Australian Businesses

The True Cost of Payment Processing in Australia

Australian businesses lose an average of $8,400 annually to payment processing fees. Yet most business owners don't fully understand what they're paying for or how to reduce these costs.

The Numbers That Matter

Average Australian business processes: $35,000/month
Typical processing fees: 1.5-2.9% + 30c per transaction
Annual cost: $6,300 - $12,180
Hidden fees often add: 20-30% more

Breaking Down Payment Processing Fees

1. Interchange Fees

Set by card networks (Visa, Mastercard, Amex):

Debit cards: 0.20-0.50%
Credit cards: 0.80-1.80%
Premium/Corporate cards: 1.80-2.50%
International cards: 2.50-3.50%

2. Scheme Fees

Additional charges from card networks:

Assessment fees: 0.11-0.13%
Cross-border fees: 0.40-0.80%
Data processing fees: $0.0195 per transaction

3. Processor Markup

What your payment provider adds on top:

Square: 1.9-2.2% for all cards
PayPal: 2.6% + 30c
Stripe: 1.75% + 30c
Traditional banks: 1.2-1.8% (negotiable)

Hidden Fees Most Businesses Miss

Monthly/Annual Fees

Statement fees: $10-20/month
PCI compliance: $100-300/year
Gateway fees: $25-50/month
Account maintenance: $15-30/month

Transaction-Related Fees

Batch processing: $0.10-0.25 per batch
Authorisation fees: $0.10-0.30 per attempt
Chargeback fees: $25-100 per dispute
Refund fees: $5-15 per refund

Equipment and Setup

Terminal rental: $30-80/month
Setup fees: $100-500 once-off
Early termination: $200-500
Software licensing: $50-200/month

Pricing Models Explained

Flat Rate Pricing

How it works: Same percentage for all card types

Example: 2.2% for every transaction

Pros: Simple, predictable

Cons: Expensive for debit cards, no volume discounts

Best for: Small businesses under $10,000/month

Interchange Plus

How it works: Actual interchange + fixed markup

Example: Interchange + 0.30% + 10c

Pros: Transparent, often cheaper

Cons: Complex statements, variable costs

Best for: Businesses over $20,000/month

Tiered Pricing

How it works: Transactions sorted into qualified/non-qualified tiers

Example: 1.5% qualified, 2.5% mid, 3.5% non-qualified

Pros: Can be cheap for debit

Cons: Lack of transparency, downgrade fees

Best for: Rarely recommended

Strategies to Reduce Payment Fees

1. Negotiate with Providers

Everything is negotiable if you process over $20,000/month:

Use competing quotes as leverage
Bundle services for better rates
Commit to volume for discounts
Review and renegotiate annually

2. Optimise Your Payment Mix

Encourage debit over credit (0.5% vs 1.8%)
Implement surcharging for premium cards
Offer cash discounts where legal
Use bank transfer for large B2B transactions

3. Reduce Transaction Costs

Batch transactions daily (reduces per-batch fees)
Verify addresses to qualify for lower rates
Use EMV chip readers (lower fraud rates)
Process same-day to avoid downgrades

4. Choose the Right Provider

Consider providers offering:

Zero transaction fees (absorb into software cost)
Wholesale interchange rates
No monthly minimums
Transparent pricing

Industry-Specific Considerations

Retail

High volume, low margin = every basis point matters
Card-present rates significantly lower
Consider integrated POS/payment solutions

Hospitality

Tips processing adds complexity
High frequency, lower average transaction
Mobile payment adoption critical

E-commerce

Card-not-present rates 0.30-0.50% higher
International processing common
Fraud prevention tools essential

B2B

Large transactions suit bank transfer
Corporate cards carry premium fees
Invoice payment solutions may be cheaper

Australian Regulations You Should Know

Surcharging Rules

As of 2016, you can surcharge but only to recover costs:

Must not exceed actual cost of acceptance
Must disclose at point of sale
ACCC can investigate excessive surcharging

Least Cost Routing

Merchants can choose to route dual-network cards through cheaper networks:

Can save 0.30-0.80% per transaction
Not all providers offer this
Ask specifically about eftpos routing

Calculating Your True Cost

Monthly Fee Calculator

Use this formula to calculate total monthly costs:

Transaction fees = Volume × Rate %
Per-transaction fees = Number × Fixed fee
Monthly fees = All recurring charges
Hidden fees = Estimate 20% of above
Total = Sum of all above

Example: $30,000/month Restaurant

600 transactions averaging $50
2.2% + 30c per transaction (typical rate)
Transaction fees: $660
Fixed fees: $180 (600 × 30c)
Monthly fees: $50
Hidden fees: ~$180
Total: $1,070/month ($12,840/year)

Action Steps to Reduce Your Fees

Audit current statements: Identify all fees you're paying
Calculate effective rate: Total fees ÷ Total volume
Get competing quotes: Aim for 3-5 providers
Negotiate or switch: Use quotes as leverage
Implement cost-saving strategies: Surcharging, routing, batching
Review quarterly: Fees creep up over time

Conclusion

Payment processing doesn't have to be your third-largest expense. By understanding fee structures and implementing smart strategies, most Australian businesses can cut payment costs by 30-50%.

Want to eliminate transaction fees entirely? See how zero-fee POS systems work.