Merchant services bank Tyro has rejected suggestions that efforts by major banks to accelerate the rollout of least cost routing for small businesses might slow its customer growth.
Tyro is the largest provider of merchant terminals in Australia behind the four major banks and grew its fleet by almost 12,000 units or 22 per cent to 62,722 in the 12 months to the end of June.
The bank pioneered least cost routing for contactless debit transactions in 2018, a move that has helped it to attract thousands of small and medium retailers to its network.
Westpac, which has been losing market share in SME lending in the last year, this month announced plans to step up marketing of least cost routing to 37,000 SME customers after promising to deliver the service by 2019.
Westpac is the first major bank to actively embrace LCR, a service that offers small retailers a way to lower the costs they incur for accepting contactless debit transactions.
The majors have been slow to promote least cost routing because its proliferation will reduce the fee revenue they receive for offering contactless payments.
Tyro chief executive Robbie Cooke told an analysts’ teleconference on Tuesday that the Westpac move was not likely to stymie his company’s ability to acquire new customers.
“We don’t think that (Westpac’s entry) makes a big difference for us – all of the banks were meant to put in least cost routing a year ago,” he said.
“We’re still very confident we will continue to grow market share notwithstanding that one institution is now introducing least cost routing.”
Tyro, which specialises in servicing merchants in the hospitality sector, yesterday reported a net loss of A$38 million for the 12 months to the end of June.
While the bank continued to expand its customer base and transaction volumes for most of the reporting period, its bottom line performance was derailed by the Covid-19 crisis that from April paralysed the business activities of hospitality merchants across Australia.
Cooke described the financial year as “gut wrenching” for his company and its customers.
“Looking back at FY20 it is difficult to imagine a year with more contrast,” he said.
“We went from the exhilarating highs of successfully completing our IPO in December in what were tumultuous markets, to the gut-wrenching lows caused by the cruel combination of the devastating bushfires in January and the onset of COVID-19 from mid-March.
“Most of our efforts in the second-half of the year were focused on doing what we could to assist our merchants on their recovery journeys, along with ensuring our business was able to continue providing the high service standards and reliability for which we are renown.”
Cooke revealed that around 3200 merchants using Tyro terminals were inactive in June.
“There were venues impacted by the shutdowns…some unfortunately may not survive,” he said.
“But we don’t have a read on that.”
In the nine month period leading up to the first lockdown measures, Tyro had been tracking to increase transaction volumes by almost 30 per cent but the wider economic downturn in the June quarter crunched the annual growth rate to 15 per cent.
Despite this slowdown, Tyro appeared to retain its focus on growth in the June quarter by acquiring new merchants at a rate of around 740 a month.
The pandemic also stalled activity in the nascent lending and deposits businesses. Tyro originated $60 million worth of lending last year and on June 30 was holding around $50 million deposits on behalf of 3675 customers.
Cooke said the company planned to add functionality to its service offers including the addition of WeChat Pay and Zip Pay over the next 12 months.
Tyro had been recording a surge in transaction activity from Alipay users before economic downturn.
Alipay transaction volumes accepted through Tyro’s payments network more than quadrupled in the nine months to the end of March.