Electricity retailers are primed to save on card acceptance
High-volume recurring card payments are the ideal case for scheme tokenisation and least cost routing online. Almost no energy retailer is using either.
Electricity retailers are some of the largest businesses in Australia. Many of them surcharge their customers, but any saving on the cost of accepting card payments is still worth having — either it comes off the surcharge and goes back into customers’ pockets, or, for a retailer that does not surcharge, it goes straight to the bottom line.
Why the industry moved to cards
Traditionally an energy retailer would sign you up to direct debit from your bank account. The problems with that are familiar: higher returns, lumpy cashflow, the need for written consent through a Direct Debit Request Service Agreement, and rejection handling that is a genuine administrative burden.
It gets worse when you want a clean API integration into billing software such as Agility or Utilibill. The rollout of properly API-led direct debit has been slow, and to get a competitive rate many providers still fall back on their bank’s direct debit facility — where the integration is poor, and SFTP is often the best on offer.
Cards are a much easier way to collect, and take-up across the industry has been accelerating.
Why this is the ideal case for two specific things
Scheme tokenisation and least cost routing online are both available now, and both are a near-perfect fit for the energy sector’s profile: very high volumes of recurring payments. Used together they can cut the cost of acceptance markedly. I would not be surprised to see some of the larger retailers save over a million dollars a year.
Which makes the next part strange. Looking across the market, I could not find a single energy retailer advertising merchant routing. That probably says more about their banking partners than about any lack of appetite to reduce costs.
So why is nobody knocking the door down? My guess is that most simply do not know these options exist, because their banker has never raised them. I would expect most CFOs in the sector could not say what either one is, let alone what it would be worth to them.
FAQ
What is scheme tokenisation and why does it matter for recurring payments?
It moves the stored card token from the payment gateway to Visa or Mastercard. For a business billing the same customers month after month, that shifts transactions into cheaper interchange categories and lifts approval rates, because the token is refreshed when a customer’s card is reissued rather than failing.
What is least cost routing online?
Routing eligible dual-network debit transactions down the eftpos rails instead of the Visa or Mastercard rails on card-not-present payments. Most banks do not offer it online; some non-bank providers do.
Why hasn’t my bank told me about this?
Because in most cases the bank cannot offer it, and a banker is limited to the products their employer sells. That is not dishonesty, it is the structure — but it does mean the absence of a conversation is not evidence there is nothing to save.
Does this only apply to electricity and gas?
No. Any business with high-volume recurring card payments has the same profile — insurance, subscriptions, telcos, gyms, childcare. Energy is simply the clearest example because the volumes are so large.