The CEO of the AADA, James Voortman told GoAutoNews Premium that the initiative has been approved by the AADA members.

“The members have endorsed it and it is something we definitely see as a priority. It’s pretty simple from our perspective. If you can get discounts for your members on these card fees the dealers can pass it on to the consumers for a better all-round experience.

“We are in the early stages. Every credit card transaction in Australia has a certain interchange fee and there are some industries that have managed to get together and get discounts on those fees such as the petroleum industry and supermarkets.

“So we are working on bringing to the table the information we need to convince the likes of Visa and MasterCard to consider our industry as worthy of a lower rate,” Mr Voortman said.

Car retailers typically accept credit cards from customers for service and parts, vehicle deposits and insurance and registration fees amongst many other items. 

Shadi Haddad, the CEO of Till Payments, who is advising the AADA initiative, told GoAutoNews Premium in a recent interview that auto dealers typically pay merchant fees of up to 1.5 per cent compared with some industries that are charged as low as 0.35 per cent.

“The current median sits at around one per cent. But it’s actually a lot higher in the smaller end of the dealer world. So we’re seeing upwards of 1.2 per cent to 1.5 per cent being charged to those dealers. And that’s only on the Visa and MasterCard. American Express is still a couple of percent higher and so are some of the other alternatives,” Mr Haddad said. 

Shadi Haddad

“However, if you look at insurance as a sector. Insurance is at 0.5 per cent at the absolute top end and as low as 0.35 per cent on the low end.

“And that’s because they’re organised. They’ve got a lobby and they have a very predictive approach around how they manage their transactions. 

“Look at fuels. Fuels are another great one. So fuel is sitting at that 50 basis points mark. And you put fuel in your car. So the fact that the fuel industry can negotiate these sorts of rates for just the fuel retailing aspect, you would hope that automotive, if they got organised with such a high ticket value, a high recurring customer value and a such a high supplier-to-buyer payments value, that we should be able to almost half the merchant services fees. 

Mr Haddad said it was estimated that $12 billion went through dealerships on cards a year and that the figure would grow as dealerships increasingly move away from accepting cash.

This trend away from cash was confirmed by Edwina Gilbert, an advisory board member to Till Payments and executive chair of the Phil Gilbert Motor Group, who told GoAutoNews Premium that the Phil Gilbert Motor Group intends to move into a cashless environment from December. 

“Even in our service operations, we will not take cash anymore. We will facilitate electronic payments because within the dealership it reduces an avenue for security around collecting cash, daily balancing of tills etc. And I think in the past 18 months, the population has really embraced what COVID escalated, which is moving to this contactless form of payments,” Ms Gilbert said.

Mr Haddad said it was possible that most dealers will move to totally cashless payments as soon as the end of this year and that the transition away from cash would see about a 15 per cent increase in digital payments going through a typical dealership.  

He said buy-now pay-later payments would also increase the need for reduced card transaction fees.

“All of the buy-now pay-later payments are now operating on cards. And one payment will become four. And even though the value in the aggregate is the same, the reality is that the subsequent payments volume is higher. 

“And so these are the sorts of things that are going to carry a big shift over to digital and if you don’t do something about it may lead to increased costs, because you’re managing a larger volume and there is a cost to digital payments.”

By the numbers 

Mr Haddad said that in 2016 cash payments accounted for 37 per cent of the $670 billion worth of payments made in Australia every day.

“It’s tracking to be about 16 per cent  for 2020 and in 2021, as an outcome of COVID, we may get close to single digits cash acceptance.” 

Mr Haddad said that of the current payments made in Australia, $710 billion a year is paid on cards with $50 billion of that going to Coles and Woolworths. 

“The rest is split between bricks and mortar retail that includes automotive and that tracks at about $310 billion annually.  Another $300 billion dollars is business-to-business payments that are made on card annually. 

“So they are huge numbers. It is fair to say the banks own 95 per cent of the market that’s why we are talking to them for better fees in industries such as automotive.”

By John Mellor