56% loss of customers due to card restrictions

Australians are becoming more reluctant to fall victim to stores enforcing minimum spends or not accepting cards as a payment method, with 56% choosing a different store if faced with restrictions on how they choose to pay.

In the increasingly competitive Australian retail landscape, this figure should be of concern for small Australian businesses as revenue may be seriously impacted over time. Bricks-and-mortar businesses need to re-evaluate their offerings in order to stay both competitive and attractive to existing and new customers.

A study commissioned by Mastercard revealed that four out of five Australians agreed that they resent restrictions such as minimum spends and charges when making payment by card – equating to 80% of customers having a negative experience. Business owners cannot ignore the implications of not offering their customers choice.

To put this to the test and prove that minimum spends can harm revenue, Mastercard conducted the ‘Limit Test’ at the University of New South Wales. The experiment involved setting up two identical coffee carts, with the same prices, menu and coffee, but one crucial difference – one cart carried a $10 minimum card spend and the other a $0 minimum spend. A significant difference was monitored in the choice consumers made between coffee carts. The $10 minimum spend cart received poor sales totaling $21. In contrast, the $0 minimum spend cart took sales of $240, further highlighting how important it is for businesses owners to rethink their payment procedures.

You can see the ‘Limit Test’ in action here.

Recent research by the Reserve Bank of Australia (RBA) reinforced the shift towards a cashless society, as over the past decade consumer payments made by cash have dropped significantly with only 37% of payments made by cash in 2016 compared to 69% in 2007. In line with these trends, Mastercard recently announced that it was bringing contactless payments to Fitbits first smartwatch, Fitbit Ionic™, as well as the newly launched Garmin vívoactive® 3. Both provide active customers a watch that frees them from having to carry their phone and wallet around, furthering Australia towards a cashless society. If business owners enforce payment restrictions or do not support contactless payments, they are alienating themselves from tech-savvy customers who will choose to go elsewhere.

Mastercard Senior VP and Digital and New Payment Flows Matt Barr said: “It’s time for businesses to seriously consider adjusting their policies, as more and more consumers are voting with their feet and taking their custom elsewhere in response to payment restrictions.”

“The Zero Minimum campaign is here to support and encourage businesses to make the transition into the future and to what one day will be a cashless society,” he said.

“Our surveys continue to reveal that Australian consumers are choosing to pay by card and are resenting any restrictions on this. If businesses do not adjust their policies soon, there is a very real chance they are going to be left behind, if they aren’t being already.”