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Chemist giant launches QR code payments to dodge card surcharge

Australians have the option to pay by QR code at Chemist Warehouse as the retail chain rolls out technology that promises to cut fees charged by Visa and Mastercard.

Oct 16, 2024, updated Oct 16, 2024
Chemist Warehouse will launch a payment scheme to dodge card surcharges. Photo supplied

Chemist Warehouse will launch a payment scheme to dodge card surcharges. Photo supplied

Under a partnership with fintech firm Waave, Chemist Warehouse says shoppers will be able to pay directly from their banks at checkout by scanning a code and entering their account details.

The purchase will then be processed under Australia’s New Payments Platform (NPP), the same infrastructure that has enabled Australians to use PayID and Osko since 2018.

The move comes as the Australian Competition and Consumer Commission will be asked to probe fees on debit and credit cards.

The card surcharges will be scrutinised under a crackdown aimed at reducing costs for small businesses and customers.

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The Albanese government is also threatening an outright ban on fees for debit cards as Labor faces going to the polls next year in the midst of a cost-of-living crisis.

Treasurer Jim Chalmers said the government was prepared to ban debit card surcharging from the start of 2026, pending further consultation by the Reserve Bank of Australia.

Chemist Warehouse founder and chief executive Jack Gance said the discount pharmacy was aiming to cut millions in transaction fees paid to card giants like Mastercard and Visa every year.

But Gance also sees the fees as “potential profits” for Chemist Warehouse’s high-volume, low-margin business model that has not traditionally passed on merchant fees to consumers.

That suggests shoppers won’t experience lower prices with the new payments.

“For a business like ours, where cost and consumer choice is important, the ability to reduce transaction fees with a secure, real-time payment option is game changing,” Gance said.

How much surcharges cost

The wider implications of growth in so-called “Pay by Bank” technology could potentially cut prices for consumers though, with most businesses passing on surcharge fees.

Australians lose almost $1 billion a year to card surcharges, according to Reserve Bank data, which does not include what shoppers pay in the form of higher prices for goods.

Woolworths is working with another fintech that offers the same technology as it explores cutting fees, while Baby Bunting and Harris Farm already use Waave online.

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How it works

The idea with pay by bank is that card operators are cut out of the transaction and money is moved directly from consumer accounts to businesses.

This process still incurs a cost, but it is much lower than the fees charged by Mastercard and Visa and more comparable with EFTPOS.

In the case of Chemist Warehouse, a QR code is being used to facilitate the transaction that will be generated from the company’s internal point of sale system to reflect consumer purchases.

But Swinburne University Professor Steve Worthington said Australians will harbour questions about the technology, including how secure it is and who holds onto an individual’s bank account details.

“I’m all for lowering payment fees for all merchants, but I am nervous about real-time payments as this means that the payment is instant and there is little or no comeback if the payment made is a fraud/scam,” he said.

“Chemist Warehouse payments would be fine as the consumer would know what they had bought … but how secure would the information associated with the payment be?”

Waave claims pay by bank is actually more secure because the transaction is processed between a bank account and a business directly, which also reduces the risk of chargebacks.

Waave co-founder Ben Zyl said the company wants to “bring payments out of the dark ages” and “create a globally accessible payments network that is good for everybody”.

Additionally to the Chemist Warehouse deal, Waave has also been acquired by UK-headquartered fintech Banked, a company that counts National Australia Bank (NAB) as an investor.

NAB made its investment in Banked with an eye towards a wider rollout of pay-by-bank payments across Australia’s retail landscape.

The push to reduce card surcharges comes as the RBA undertakes a broad review into the payments system and its regulation with an aim of improving transparency for consumers.

Consultations will begin in December around questions like whether business should be more upfront with consumers about card fees and offer alternatives that cost shoppers less.

– TND

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