Restaurants at sharp end of PIN changes
Eric Duong, manager of Melbourne restaurant Man Mo, says he is worried many of his older customers will not be prepared for new credit card rules. Photo: Patrick Scala/Getty Images
Restaurant owners claim they are the victims of the banks’ push to cut fraud losses, with the scrapping of signatures on credit cards forcing them to buy extra mobile terminals to take to tables.
John Hart, the head of Restaurant and Catering Australia, claims restaurant payment terminal costs may triple for his members, even though banks are belatedly offering discounts on new machines to ease the switch to PIN only.
“It is significantly increasing – probably tripling – the hardware costs each month,” Mr Hart said.
Businesses with a single terminal pay about $40 a month. Mr Hart said this would rise to about $200 a month because they would need to buy extra mobile terminals to be able to take tips at tables to avoid queues and split bills. This can be done now on cards by adding amounts to signed paper bills.
Mr Hart estimates about 70 per cent of his members do not have enough terminals to be able to do the same electronically.
Fraud losses for card purchases made in person are worn by the banks, so it will be the banks that benefit from the change to PIN only, Mr Hart said.
‘CARD PRESENT’ FRAUD TARGETED
For the 2013 calendar year, total fraud losses on credit and debit cards were $285 million, with $219 million of this due to cards fraudulently used online. Banning signatures won’t deal with online fraud. It is aimed at reducing so-called “card present” fraud, which amounted to $65.7 million.
Lance Blockley, the managing director of financial consultant RFi, who is in charge of the card companies’ and banks’ campaign to make the switch, said Australians were among the most significant users of signatures for card transactions at the start of the year. Only about 65 per cent used PINs for credit cards, now the figure is up to 80 per cent. “We estimate there are 10 to 15 per cent who won’t use a PIN until they are forced to,” Mr Blockley said. There are bound to be some teething problems, he said, but as in the UK, where fraud on card purchases plummeted after signatures were scrapped in 2006, he predicted these would be forgotten within six months.
Owner of Melbourne Docklands waterfront Malaysian restaurant Man Mo, Eric Duong, said he was worried many of his older customers would not be prepared for the change to PIN. “The biggest issue I can see occurring will be with people who have not converted their credit cards to PIN,” he said.
“I imagine this will create some embarrassment. Fortunately for us, there is an ATM close by and we can suggest our customers go to the ATM to withdraw money.” One restaurant owner suggested he might let customers come back and pay the next day.
Mr Dough has installed terminals with an inbuilt tipping option.
“It will be a matter of people getting used to it, but it will be at least a month or so,” he said.
BANKS’ RIVALS CASH IN
David Zhou, owner of David’s Zhou Zhou Bar and Oriental Teahouse in Melbourne, is concerned customers will forget their PINs. However, he has installed terminals that allow tips.
“I think there will be more people rushing to the ATM to get money,” Mr Zhou said. “It will be messy and it will hold up queues.”
Mr Zhou said customers may also feel obliged to tip when using the new terminals, and staff would feel awkward about asking for a tip.
In a good-quality restaurant, Mr Hart said staff relied on tips and could take home between $100 to $500 a night. He told The Australian Financial Review in June that he had received little assistance from the big banks – who own the lion’s share of the terminals – to deal with the potential loss of tips.
But they have since offered cheaper deals on new terminals and fee waivers on replacement card readers as competitors to banks such as Tyro and PayPal take the opportunity to offer different payment options.
Tyro chief executive Jost Stollman said he had seen a big increase in orders for card terminals because all of his terminals are mobile and offer tip functions and bill splitting. “In 2013, we had 30 per cent growth in transactions, this year I am expecting about 200 per cent – we are experiencing it now,” Mr Stollman said.
PayPal recently launched its first physical card reader, which can be used with mobile phones to take payments. It also offers an app for people to pay businesses directly online using their phone.
Mr Hart, however, said PayPal’s and Tyro’s merchant service fees are a lot higher than the banks’. Both payment providers argue the fees are justified because they offer a better service to customers and merchants.
Source: Financial Review - 1st August 2014
