The quiet surge of surcharging
More and more merchants are surcharging you just to pay them. It's hitting the tips of waiters and also distorting price signals in the payment system.
As anyone who’s worked in hospo knows, tips are not just a welcome surprise but sometimes the difference between a decent and indecent income. But — anecdotally although widely acknowledged — tips are declining. And this started before Covid and cost-of-living issues.
According to many in the business, the cause is surcharging on payments. When merchants surcharge, tips go down or disappear. Customers say, 'why should I tip when I’m already being surcharged for service?'
Well, you’re not. You’re being surcharged for paying your bill. But more significantly, that surcharge goes to the business owner or terminal owner, and not the staff. The more a business surcharges, the lower the income for staff. In essence, it’s a transfer from the pocket of staff to their employers or terminal providers.
According to the latest RBA Consumer Payments Survey, the incidence of surcharging increased more than 50% between the 2019 and 2022 surveys. But that is likely understated, according to people familiar with the survey, which comes from consumer logbooks. Moreover, anecdotally the incidence of surcharging has accelerated as inflation has driven up merchant costs.
