Australian businesses could be losing up to 56 per cent of customers due to minimum spends or not accepting card as a payment method.
A study commissioned by Mastercard revealed that four in five Australians agreed that they resent restrictions such as minimum spends and charges when making payments by card. According to the study, 56 per cent of surveyed Australians would choose a different store if faced with restrictions on how they choose to pay.
To put this to the test and prove that minimum spends can harm revenue, Mastercard conducted the ‘Limit Test’ at UNSW. This 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 totalling $21, whereas the $0 minimum spend cart took sales of $240.
Mastercard Senior Vice President of Digital and New Payment Flows Matt Barr says the research highlights how important it is for businesses owners to rethink their payment procedures.
“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,” he said.
“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. 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.”
Whereas there may be a suggestion that the younger generations are more inclined to be tech savvy, Mastercard’s survey revealed that there has been a 14 per cent year-on-year increase in 30-49 year-olds who prefer to use cards for small transactions. Now, 67 per cent prefer to make payments by card, bringing to light that it is not only millennials who prefer not to be weighed down by loose change in their pockets.
Recent research by the Reserve Bank of Australia shows payments made by cash have dropped significantly over the past decade with only 37 per cent of payments made by cash in 2016 compared with 69 per cent in 2007.