Major cashless move to stop $1 billion Aussie surcharge rort: 'We want to disrupt'

You might not think twice if you walk past a QR code, but it could be the key to solving a multi-million dollar problem affecting nearly every Aussie. A new cashless payment system has arrived in Australia and it could revolutionise the way we pay for things and bring us in line with other nations.

Card surcharges have been lashed by regular Aussies, business owners and even the bosses of some of the biggest banks in the country. However, person-to-person payments through QR codes have been adopted by other countries to cut out the middleman, which is usually the bank or a payment service provider (PSP) like Visa or Mastercard.

The Pyng app is jumping on the bandwagon in Australia and CEO Dipra Ray told Yahoo Finance the app has the power to save some Aussies "hundreds and thousands of dollars".

"We want to disrupt Visa and MasterCard at a national level, and then hopefully on a global level," Ray explained.

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Rise of digital payments without 'rip-off' surcharges

Pyng is very similar to the government-led payment system launched in India, called Unified Payments Interface (UPI).

Millions of people pay for everyday items by scanning a QR code attached to a merchant and sending their money off instantly.

There were 12.2 billion UPI transactions processed in January this year alone in India, which is a huge increase from the one billion recorded in October 2019. In July this year, data shows there were 5,390 payments made using the system every second.

A PwC report noted that while the UPI system is a huge win for consumers and merchants as they don't have to pay surcharges, it has "resulted in [the] loss of a major revenue stream for banks and [payment service providers]".

"If we look at India, Southeast Asia and Brazil... there are lots of countries in the world where this has been emulated," Ray explained to Yahoo Finance.

"A significant portion of retail transactions should flow through the Pyng network over time. Our ambition is to be the preferred way that people pay for in-store transactions, which will save them hopefully hundreds and thousands of dollars."

How can I pay using a QR code?

It's basically like doing a bank transfer to someone but without needing to know the BSB, account number or phone number of the other person.

If a business signs up to the Pyng system, they'll be given a QR code that they can place at the till or checkout counter.

Consumers who have also downloaded the app and input their details can scan the code when they're about to pay.

They then put in how much they want to send to the merchant and the money gets whisked away.

"The money goes from your bank account directly to the merchant's bank account with no one coming in the middle," Ray explained.

"So Pyng doesn't hold the money, none of the banks have the money. It's a bank account transfer in real-time.

"And what that does is that significantly reduces the operating cost of running the model."

At the moment, it's free for consumers and merchants to sign up, but Ray said they will soon introduce a subscription model for merchants, which he estimates will be around $20 to $30 per month.

After only being in Australia since July, around 30 merchants have signed up and Ray is hoping this grows exponentially over time.

Surcharging makes 'no sense' in 2024

Ray said surcharging shouldn't exist on debit purchases in Australia, especially when PayID is a free way to transfer money from person to person.

"It makes absolutely no sense when you use your own money to pay that you suddenly lose 1.5 per cent [in surcharging]," Ray said. "It's, frankly speaking, quite ridiculous."

He's not alone in his belief.

NAB boss Andrew Irvine recently told a parliamentary hearing that card surcharging doesn't pass the pub test these days.

"It's possible that surcharging was warranted over 20 years ago, but I think it behooves us to ask whether it still serves its purpose," the NAB boss said.

"It just adds to confusion. It means I don't know what the price of a good is that I'm buying and I don't like it."

A recent analysis of Reserve Bank of Australia (RBA) data by the ABC found card surcharges were costing Australians closer to $960.26 million a year.

Canstar also found earlier this year that merchant service fees just for credit cards amounted to a whopping $4 billion in 2023. That's not including the fees attached for debit or EFTPOS transactions.

Sometimes these fees are passed onto the consumer, but other times a business will cop the charge, which can really hurt their bottom line.

Home Or Away Mechanical in Queensland told Yahoo Finance they pay upwards of $5,000 a year on bank costs to accept cards.

Mimolette Café owner Richy Marchandise also explained to Yahoo Finance that his card system fails all the time and that can quickly turn away customers.

Ray hopes to solve these issues with Pyng.

"What Pyng is doing is creating a technology platform that sits on top of [current card payments] and creates a value both for the merchant and for the customer, and just makes an entire process seamless," he said.

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