How your small business can let customers pay by card


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Sarah Morgan owns two Bladez Barbers salons in Queensland.

She asks: What electronic payment systems can I use without increasing my prices?

I'm the owner of Bladez Barbers salon located in a small village-style community shopping centre in Margate in north-eastern Brisbane. I opened the salon in early 2016.

small business Sarah Morgan owns two Bladez Barbers salons in Queensland hair dresser card payment services

Late last year I opened a second salon in a bigger shopping centre in the Burpengary Plaza.

For the past two years Bladeblazers operated on a cash-only basis, which worked perfectly well at Margate, where we were very familiar to the local community.

However, in the much bigger Burpengary Plaza, almost 90% of customers expect to be able to pay using a credit card or eftpos. Adding merchant payment solutions to this business will force me to change my prices and I've only been in business in Burpengary for six weeks.

Currently I charge $25 for a haircut at the Burpengary salon.

We are known for our affordability but adding card services will impact our competitiveness. Are there some alternative payment options I could consider that will help me avoid increasing my prices?

1. We're going cashless

Sarah, thanks for your question. Opening a second location is an exciting time for an expanding small business.

But as you've discovered, Australia is heading towards becoming a cashless society, and this is having a profound impact on small businesses like yours that rely on a high volume of lower dollar value sales.

Already half our payments are made electronically, and the rollout of the New Payments Platform (NPP), which allows money to be transferred almost instantaneously even when payer and receiver use different banks, takes us a step closer to becoming cashless.

Therefore, small businesses are being forced to embrace electronic payment options.

2. Smartphone can do it

Providing electronic payments calls for the involvement of a third party, and like any business they expect to be paid for this service. So, yes, it does mean paying fees.

However, sticking to "cash only" could mean losing valuable business. If it comes to the choice of having to find an ATM to withdraw cash or go with a salon that offers card payments, many consumers will go for the latter.

With this in mind, let's look at what's available.

Commonwealth Bank offers Emmy, an app and payment terminal linked to your tablet or Apple or Android smartphone. Expect to pay $30 a month for up to $1500 worth of card transactions; excess transactions incur a fee of 1.5%.

The catch is that you'll need a linked Commonwealth Bank business account.

But monthly account fees are waived when you use this plan. At $25 per haircut, the flat fee could cover 60 haircuts paid for by card each month - though that's only two per day, which is not much in a busy salon.

Sarah Morgan owns two Bladez Barbers salons in Queensland card payment services
Sarah Morgan

3. Price of flexibility

Westpac's equivalent is Genie, which offers a pay as you go plan. Instead of paying a monthly fee, each card transaction comes with a charge of 1.95%, so you only pay for transactions made electronically.

So $1500 worth of sales made using Genie could cost you around $29.25 - only marginally cheaper than Commonwealth's Emmy system.

Put simply, for the price of just one haircut each month you're giving your customers more flexible payments options, and this could see more people coming to the Burpengary salon.

If you don't want to be tied to a bank, independent options include iCCPay, an app that turns your iPhone or iPod Touch into a mobile credit card terminal without the need for additional hardware. For the cards such as Visa, Amex and Mastercard, fees are 1.9% plus 20 cents per transaction. The app costs just under $10.

4. Weigh up all the options

In fact, a host of systems are available such as Shopify (pay from $29 a month plus $1.75 plus 30 cents per transaction). Or check out Pin Payments (1.75% plus 30 cents per transaction).

PayPal also offers merchant payment solutions through its Braintree division. Pricing starts at $1.75 plus 30 cents per transaction. In a business such as Bladez Barbers - catchy name, by the way - with lower value dollar sales, deferred payments services such as AfterPay or PayItNow may not be suitable. However, they are an option for other retailers.

Expect to pay a flat fee of about 15-30 cents per transaction plus commission of around 2%-6% per purchase.

The challenge for your salon is to weigh up which option offers the best value. It may be worth lifting your prices by $1 or $2 per haircut to cover the cost and offering a discount for cash.

Consumers, myself included, are highly motivated by the prospect of scoring a discount, and it could be the marketing incentive that maintains your cash-based sales without losing customers who prefer to pay by card.

- Are you a small business owner with a challenge you'd like Money to help solve? Email [email protected] with your question and contact details. You must be willing to provide a photo.

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Anthony O'Brien is a small business and personal finance writer with 20-plus years' experience in the communication industry.