Westpac credit charge surcharge for paying a speeding fine - can't the Govt get better banking deals?

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Forums › Finance and wealth management › Westpac credit charge surcharge for paying a speeding fine - can't the Govt get better banking deals?

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Ultimate Geek

#934782 16-Nov-2013 09:56

Why is it even a percentage? The cost of processing a 1c transaction is exactly the same as processing a $1M transaction, is it not?

Bung

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#934786 16-Nov-2013 10:04

A good fixed fee precedent would be Wgtn parking using Credit cards with a 50 cent surcharge.

timmmay

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#934805 16-Nov-2013 10:28

Credit cards provide fraud protection and a money back guarantee. That's probably one reason they charge a percentage. In this case I doubt the police tried to negotiate a better rate, it's like a little extra penalty.

The government switching from Westpac to another bank would be a massive job. It's not just regular banking, Westpac has done huge amounts of custom development to support the various requirements of departments and projects. I was associated with a project that had a significant amount of work done by Westpac to create a new payments system, months of work for that project alone. The cost of switching would probably be in the tens to hundreds of millions of dollars at a rough guess.

Kyanar

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#934874 16-Nov-2013 13:15

I can't work it out. I run almost no volume each month, and Westpac charges me 2.1ish % per transaction, yet somehow the entirety of the NZ Government gets a crappier rate than my non-negotiated retail rate?!?

I guess it's just because there's no incentive for the government to ask for a better rate, because they don't have to pay it.

jdbob

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Geek

#936387 18-Nov-2013 08:12

The percentage charged may reflect the history of losses from a customer (in this case, the police).

People paying fines are probably pretty dodgy

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#937928 20-Nov-2013 14:38

But the police says they don't keep the money (3% transaction fee all goes to westpac who by the way made more money than the government)

surfisup1000

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#937944 20-Nov-2013 14:53

joker97: But the police says they don't keep the money (3% transaction fee all goes to westpac who by the way made more money than the government)

The police also said they received no complaints about roastbusters.

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Kyanar

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#937972 20-Nov-2013 15:51

surfisup1000:
joker97: But the police says they don't keep the money (3% transaction fee all goes to westpac who by the way made more money than the government)

The police also said they received no complaints about roastbusters.

No, it's actually true. The "convenience fee" is imposed as a separate charge on your statement by either Westpac or American Express depending on how you pay. The consequence of this is that the government (and Telecom, who do it too) don't have to pay the percentage charge on the transaction.

Handsomedan

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#938524 21-Nov-2013 16:44

xarqi: Why is it even a percentage? The cost of processing a 1c transaction is exactly the same as processing a $1M transaction, is it not?

Actually, no...

There are fixed $ costs (scheme fees etc) and percentage based costs (interchange)

On top of this, there's a cost to actually provide the merchant service...it doesn't come free.

On a percentage basis, it's more expensive process a $1 transaction than it is to process a $1m transaction.

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xarqi

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Ultimate Geek

#938564 21-Nov-2013 17:47

Handsomedan:
xarqi: Why is it even a percentage? The cost of processing a 1c transaction is exactly the same as processing a $1M transaction, is it not?

Actually, no...

There are fixed $ costs (scheme fees etc) and percentage based costs (interchange)

On top of this, there's a cost to actually provide the merchant service...it doesn't come free.

On a percentage basis, it's more expensive process a $1 transaction than it is to process a $1m transaction.

It makes no more sense for interchange fees to be a percentage of transaction cost, so that isn't much of an argument.
Merchant service, again, how does service cost depend on transaction size?

I'm not saying that isn't the way it's done, just that there is no concrete basis.
Now, if it were a matter of shifting gold bars around, or even counting money, where the effort is proportional to the value, that would make some sense, but for a purely electronic transaction, where all that happens is that numbers move from place to place, not so much.

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#938566 21-Nov-2013 17:56

The comparison with NZTA is interesting - when they first offered the option of rego renewal (and the like) online, there was a 2-3% surcharge, meanwhile paying cash/eftpos in a post shop carried no surcharge (althogh I'm sure NZPost charges NZTA a nice transaction fee). Glad NZTA finally fixed that anomaly, perhaps Police will see the light - AFAIK credit card online payments for fines is a recent development.

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#938575 21-Nov-2013 18:18

xarqi: Why is it even a percentage? The cost of processing a 1c transaction is exactly the same as processing a $1M transaction, is it not?

It's less about direct cost of the transaction and more about risk. When Visa/MC approve a credit transaction, they are taking on risk that it's not repaid.

Larger retailers get a better deal because the put through larger volumes, but they also are less risky. Pretty much everything in the credit world comes down to risk.

It's also related to rewards rewards programs. When you spend on your card, the merchant fee goes some way to covered the reward points the card holder may be entitled to - which obviously for a 1c vs $1m transaction is material.

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xarqi

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Ultimate Geek

#938587 21-Nov-2013 18:44

ajobbins:
xarqi: Why is it even a percentage? The cost of processing a 1c transaction is exactly the same as processing a $1M transaction, is it not?

It's less about direct cost of the transaction and more about risk. When Visa/MC approve a credit transaction, they are taking on risk that it's not repaid.

Larger retailers get a better deal because the put through larger volumes, but they also are less risky. Pretty much everything in the credit world comes down to risk.

It's also related to rewards rewards programs. When you spend on your card, the merchant fee goes some way to covered the reward points the card holder may be entitled to - which obviously for a 1c vs $1m transaction is material.

OK - makes a bit more sense to me now, thanks.

Bung

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#938592 21-Nov-2013 18:55

ajobbins:It's less about direct cost of the transaction and more about risk. When Visa/MC approve a credit transaction, they are taking on risk that it's not repaid.

Larger retailers get a better deal because the put through larger volumes, but they also are less risky. Pretty much everything in the credit world comes down to risk.

How many fees should this risk be offset against? Isn't the unsecured nature of CC debt used to justify the 20% interest rate?

ajobbins

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#938598 21-Nov-2013 19:19

Bung: How many fees should this risk be offset against? Isn't the unsecured nature of CC debt used to justify the 20% interest rate?

Welcome to the banking world and super-normal profits.

Yes, the high interest rate is also aligned to risk - but they would argue that is the ongoing risk of you continue to remain in debt (I.e. - if you pay off the debt within the period, the risk goes away).

The merchant fee at time of transaction covers risk of default in the first statement period, risk of fraud, loyalty programmes and cost of providing the service.

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