B2B Payments

The Carrots and Sticks of Invoice Surcharging

The fees companies pay to accept card payments from customers have long been a point of contention. An Australian company, eWAY, is using a system from Xero that automates the ability to enable a surcharge on card payments while also giving buyers the chance to opt out by paying through direct funds transfer instead.

An Australian payments provider reportedly has begun offering a service that can help offset the fees companies pay for accepting major payment cards by providing a surcharge option to apply to customer invoices paid online.

The company, eWAY, last year partnered with Xero to launch eWAY Payment Services for Xero Online Invoicing. It also added the ability to take payments from customers immediately upon invoicing them through the Xero Pay Now online invoicing service.

eWAY recently became the first provider globally to use PayThis, which enables companies to add customer surcharges to payments initiated with Visa, MasterCard, American Express or Diners Club cards, reports BoxFreeIT, which says other providers soon will roll out their own versions. Xero users set the amount for each type of card, and the surcharge is applied when a customer pays an invoice through Xero’s online invoice portal.

PayThis uses eWAY’s responsive payments page, and it provides two online invoicing methods. Users may include credit card surcharges and Social Payments, or they may use PayNow with Xero, which uses the company’s payment service, according to eWAY’s website.

What’s unclear is whether surcharging customers is worth the hassle. While many companies abhor having to pay 2 percent or more of the sale to accept card transactions, accepting payment cards is something many expect companies to do and fold the cost into the price of their products.

In the BoxFreeIT article, Trent McLaren, eWay’s “Xero ambassador,” notes that businesses that help customers to pay invoices online may decrease how long it takes to get paid. “Instead of that eight-week cycle, you’re (getting paid) in days, not weeks,” he said. Even when a customer opts instead to pay by direct deposit to avoid the surcharge, “we’ve still done our job in terms of helping that customer improve their cashflow,” he added.

In Xero’s Business Community, one participant noted that in Australia, customers are used to paying card surcharges, and he “would love to see this feature.” Another commenter said a setting to be able to auto-add a credit card payment surcharge would be helpful. “We won’t be using this facility until then unfortunately,” she said.

Partners and users want to pass that credit card fee onto the customer paying the invoice, McLaren contended in the article. “It allows you to recover the cost of having an online payment system,” he said.

To apply the surcharges Xero displays the amount on the online invoice’s payment screen in red. It then prompts the customer a second time to acknowledge the surcharge before paying it. eWAY’s rates fall with volume but start at 2.9 percent of the sale plus 13 cents, dropping to 1.9 percent or less with a monthly subscription starting at $49 per month.

eWay’s next plan reportedly is to add automatic late fees to invoices paid through Xero’s online invoicing portal.

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