Online retailers stand to benefit from new regulation
New research commissioned by American Express has revealed online retailers may be the biggest beneficiaries of a new regulation that went into effect last week, which prohibits excessive surcharging on credit cards by small retailers.
In a survey of more than 1,000 Australian credit card users conducted by Retail Doctor Group (RDG), 19 per cent said they had abandoned an online purchase because of an unexpected surcharge.
Consumers last year walked away from $4.33 billion in transactions because of surcharging, so by removing surcharging, online retailers could see a dramatic increase in sales.
Brian Walker, founder of RDG, said, “Unexpected surcharges are one of the leading causes of digital shopping cart abandonment. Removing surcharging ultimately leads to a more positive purchasing experience online and in store – it’s a bottom-line benefit to businesses and consumers.”
Almost half of the survey respondents (47 per cent) estimate that credit card surcharges cost them up to $20 per month, with one in six putting that figure up to $40 per month.
Ninety per cent of customers said they consider past surcharging practices when deciding whether or not to return to a business, and 88 per cent are in agreement around removing or reducing surcharging.
The research found that small retailers could see the number of repeat customers increase by 30 per cent by reducing or going surcharge free, with repeat customers spending 67 per cent more than new customers.
Vice president of global merchant services at American Express, Emily Roberts, said the findings confirm that surcharging is bad for business.
“Removing surcharging means fewer complaints, more repeat business and increased sales. In an industry up against heightened international competition, addressing the issue of surcharging presents a new opportunity for local businesses,” she said.
In July, American Express announced it aimed to double the number of small businesses accepting its cards in the next two years, and has lowered merchant service fees for tens of thousands of Australian small businesses that choose not to excessively surcharge American Express card members.