Garry Duursma, Head, Market Development and Innovation for MasterCard, recently spoke with Dynamic Business about the need for retailers, including small brick-and-mortar businesses, to meet consumer expectations around electronic payments and gain the efficiencies of embracing the Zero Dollar Minimum.
Remove restrictions to boost patronage
In April, MasterCard, together with a number of Australia’s banks and payment providers, launched the Zero Dollar Minimum campaign, which encourages retailers to give customers the freedom to make restriction-free cashless transactions.
The campaign draws on research commissioned by MasterCard involving a sample of 1,010 Australian cardholders. Conducted by research firm Ipsos in January, the study revealed that 84% of cardholders resent restrictions such as having to pay fees for small transactions (i.e. purchases under $10) and more than 60% prefer to pay for small transactions with their card, rather than cash, and find it frustrating when this option isn’t available.
Critically, two in five cardholders (44%) said they actively avoided shops that don’t permit the use of cards for low-value transactions. Young consumers, in particular, are making their frustration felt when a shop insists on a minimum spend requirement – 54% of participants aged 18 to 34 are voting with their feet and taking their patronage elsewhere.
According to MasterCard, the findings suggest retailers that impose a minimum spend requirement on card users are missing out on two-fifths of their potential patronage. In other words, the stand to gain approximately 40% more business if they accept cards for transactions of all sizes.
Consumers demand freedom of choice
Duursma told Dynamic Business that consumers not only want – but increasingly expect – the freedom to purchase goods and services of any value with their preferred payment form, whether that is cash, card or another digital or contactless form of payment. Part of this freedom, he explained, is the ability to make cashless transactions of all sizes without the inconvenience of restrictions such as a minimum spend requirement.
On top of this, Duursma said consumers are increasingly becoming cashless citizens. He pointed to Galaxy research, commissioned by MasterCard, showing that two in three Australians (64%) have reduced the amount of cash they carry in anticipation of a cashless society, with more than half this number (53%) carrying less than $50 in cash. Further, one in three Australians (39%) believe retailers need to do more to embrace new payment innovations to help eliminate cash.
Duursma warned retailers still imposing a minimum limit on card transactions that consumers increasingly select or reject brands and businesses based on whether their purchasing experience was fast, convenient and seamless.
“As Australia marches towards a cashless future, the retail industry has increasingly sought to remove barriers to cashless transactions,” he said. “To remain relevant and competitive, it is essential for retailers of all sizes – indeed, any customer-driven business – to facilitate cashless transactions. By embracing the Zero Dollar Minimum, retailers are essentially futureproofing their businesses. With the anticipated continued growth of payments using emerging technologies such as mobile payment and wearable payment technologies, retailers need to gear up and take steps to continue serving customers into the digital future, regardless of how they want to pay.”
Cashless benefits outweigh the costs
Duursma said the interchange and transaction fees retailers pay for offering consumers the ability to pay for goods and services electronically with a card are – despite the concerns held by some small transaction merchants – nominal. Further, he pointed to an RBA study, highlighting the increasing cost to businesses of handling cash, compared with electronic payments.
“The benefits of accepting credit and debit cards far outweigh the perceived cost,” Duursma said. “As research shows, consumers who are provided with payment options are more likely to complete transactions and return to the store – and that can only help a small business to grow.”
In addition, Duursma explained that cashless payments are quicker, cleaner and safer than cash payments.
“Contactless technology has resulted in payments being virtually instantaneous, which means faster queues and the ability to serve more customers,” he explained. “Cashless payments are also more hygienic – whereas cash passes through many hands, cards don’t need to be exchanged. Further, card transactions reduce the volume of cash being handled and transported as well as the amount of cash in the till, minimising the risk of theft. Other potential benefits of embracing cashless payment methods and taking advantage of future developments include digitizing and consolidating loyalty solutions.”
Since the launch of the Zero Dollar Minimum campaign, Duursma said MasterCard has been encouraged by its interactions with nearly 2,500 small transaction merchants in key market centres. While 47% of those merchants still have a minimum spend requirement for card transactions, the majority of merchants without this requirement indicated a preference for going cashless – and this has been welcomed by their customers.
To learn more about the Zero Dollar Minimum, including how you can participate in the campaign, visit www.no-minimums.com.au