Point-of-sale (POS) providers will continue to evolve beyond simple payment acceptance services, market disruptors Tyro and Zeller say, even as lawmakers question whether the fees charged to small businesses provide value for money.
ASX-listed Tyro unveiled its 2024 financial year results on Monday, showcasing revenues of $471 million, up 8.2% over the year, and gross profit of $210 million, a 9.1% bump from the year prior.
Tyro’s core business — payments processing for businesses, including healthcare and service providers — contributed $445 million of revenue over the year, a year-on-year growth of 6.2%.
But its banking services, encompassing its business lending operation, was a standout performer.
Banking revenue contributed $14.7 million to Tyro’s overall revenue, but this represented a significant 39.6% jump from the 2023 financial year, and gross profit from its banking wing rose 29% year-on-year.
In a statement provided to SmartCompany, Tyro CEO and managing director Jon Davey said businesses are looking for more than just a simple EFTPOS reader at the shop counter.
“We can see that the point-of-sale market is evolving rapidly,” he said.
This includes technology allowing customers to pay at the restaurant table, online, or at their own front door, he said.
Lending is another important part of the picture.
“We know that our merchants are looking for solutions that simplify their operations,” he said.
“At Tyro, we’re seeing a strong interest in our integrated payments and banking solutions, which streamline cash flow management and reduce administrative time.”
Attempts to innovate in a highly competitive sector won’t end there, Davey continued.
“As we continue to innovate, our focus remains on delivering solutions that build consumer love and a competitive advantage for our merchants.”
Zeller is championing its own innovations, having launched its own next-generation POS terminal and built-in app this week.
The fintech says the new, free app can help businesses manage their inventory, apply discounts, and integrate with more than 600 other back-end systems, surpassing the capabilities of ageing POS technology.
Like competitor Tyro, Zeller CEO and co-founder Ben Pfisterer says Zeller is aiming bigger than just merchant acquiring services.
“Over the past 3.5 years we’re proud to have built a successful alternative to the outdated bank solutions, which delivers on our promise to combine every financial services product a business needs into one cohesive ecosystem,” he said.
Beyond its terminals, Zeller also offers easy-signup debit cards, which it says can help businesses get up and running faster than traditional banks.
And it too is considering how to offer business lending services in the future.
“We’re committed to delivering a complete financial solution that offers more than what a business owner would expect from a traditional bank,” Pfisterer said.
“Business lending is another important product we plan to offer to customers in the future to deliver on that objective, yet it’s not a product we’re actively working on right now.”
Accessing those features comes at a cost to businesses.
For most merchants transacting below $20,000 a month, Tyro offers fees of 1.4% per transaction; in-person card payments also attract a 1.4% fee under the Zeller system.
Those fees are higher than the standalone price of processing a debit payment through the domestic EFTPOS system, which costs merchants less than 0.5% of total transaction value, according to the Reserve Bank of Australia.
Fees for debit payments processed through the popular Visa and Mastercard systems average between between 0.5% and 1%; credit transactions skew higher.
And small businesses tend to pay higher fees than larger national retailers, which may be able to negotiate fee discounts due to the volume of transactions they facilitate.
Those fees — which can be passed on to consumers in the form of surcharges — have attracted the ire of Labor Senator Jerome Laxale, who this month pledged to campaign for fee-free digital payments.
On Thursday, he challenged Commonwealth Bank CEO Matt Comyn over the fees his bank — the largest merchant acquirer in Australia — passes to retailers using its POS technology.
Citing Canstar research, Laxale says Australians pay $4 billion annually in fees charged by merchant acquirers, banks, and card scheme operators like Visa and Mastercard.
Comyn disputed that figure, calling it “grossly exaggerated or inaccurate”, and said handling digital payments does come at a considerable cost for financial institutions.
In addition, the RBA has brought forward its review of payment acceptance fees, which will also consider whether surcharging retail customers for card payments should be banned.
In the face of growing scrutiny in the payments sector, the fintechs say merchants are willing to pay for systems that provide more than simple card acceptance technology.
“POS providers are increasingly looking for ways to embed payments into their devices and system directly to make sales seamless,” Davey said.
“In 2024, we expect to see this shift towards more integrated solutions continue, as well as a rise in personalised customer experiences through digital apps.”
Zeller’s “market-leading transaction fees” enable merchants in its system to “save money and operate more effectively” overall, Pfisterer added.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
