Dishonour fees are fees imposed by a financial institution when a payment doesn’t go through or fails, for example, if there are insufficient funds in the account or an error in the payment details. Figures suggest that 32 per cent of Australians get charged a dishonour fee in the past year.

As such, dishonour fees are considered a burden to many Australians as they face ongoing financial challenges, and 86 per cent have said they are more likely to return to businesses that avoid these charges altogether, with such businesses standing to benefit from increased customer loyalty and competitive advantage.

Small businesses blamed

Unfortunately, small businesses are often blamed for the pesky charges.

Kyle Willersdorf, Account Director Australia and New Zealand at GoCardless commented, “Australians have made their stance on dishonour fees loud and clear: these archaic and unnecessary charges are flat-out harmful to businesses and customers. They also unfairly damage the reputation of small and medium businesses, which are often blamed for fees driven by outdated payment systems. Too often, these charges turn failure into a revenue stream for payment providers, instead of incentivising them to work with their business customers to improve payment success.”

The GoCardless research found that insufficient funds cause 57 per cent of payment failures, while 36 per cent stem from outdated payment systems like expired cards, noting that these fees often penalise people for everyday financial challenges while payment providers get to enjoy an additional revenue streams..

Of those who believe these fees are unfair, 41 per cent agree that the fees they have seen are also disproportionately high, which highlights the need for reform, especially with other anti-consumer surcharges currently under governmental scrutiny.

As a result, the 82 per cent of Australians that get charged with a dishonour fee in the last 12 months shared that these charges create unnecessary financial stress.

The research said that by addressing these concerns with transparent and empathetic payment practices, businesses can ease customer frustration and build lasting trust.

Willersdorf stated that cutting failure fees altogether would benefit both businesses and their customers. He said, “Charging dishonour fees is optional for payment service providers (PSP). Our perspective is that if a PSP earns money from a business’ misfortunes, then it is not aligned with that business’ best interests. By adopting transparent, innovative and customer-first practices, businesses can reduce frustration, improve loyalty, and build a reputation for fairness and reliability.”

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The survey found that 62 per cent of SMEs are conducting their international trade through the big four banks this year, meaning that they are being charged with higher exchange rate mark-ups and fees than specialist money transfer providers. Furthermore, an additional 14 per cent transact through a smaller bank and 31 per cent use the same bank or provider for their money transfer needs.

In a recent report, the ACCC noted that international money transfer fintechs offer better prices than the big four banks, even after the latter removed or reduced flat fees on transfers in the last five years. Money Transfer Australia also pointed out that for every $20,000 exchanged through the banks, businesses could be paying up to $850 extra, compared with as low as $100 through a non-bank money transfer provider.

Surprisingly, the survey also found that 88 per cent of SMEs know how much they are paying in fees when they transact internationally, and 89 per cent know how much they are paying in currency exchange mark-ups. 91 per cent also check the fees and mark-ups payable before they transact.

The survey also noted that the larger the business, the more likely they are to use a bank for international money transfers. A total of 74 per cent of those with more than 200 employees use a big-four bank, compared with 68 per cent of those with 11-50 employees and 45 per cent of micro businesses. Furthermore, the larger the business, the more likely it is to also use the same bank or provider at 42 per cent of large businesses, 33 per cent of small and medium-sized businesses and 25 per cent of micro businesses. Meanwhile, small businesses (11-50 employees) paid more attention to the extra fees in transferring money internationally.

Why businesses are sticking to the banks

As to why most businesses still conduct foreign trade through banks, 51 per cent said they trusted banks more and 31 per cent said they prefer to have access to ‘people on the ground’ in Australia over an online service, which potentially offers support staff offshore. Furthermore, 30 per cent don’t like to switch to new service providers that they are not familiar with and 15 per cent enjoy preferential rates through their bank. 14 per cent, meanwhile, prefer to do all their banking in one place.

Money Transfer Australia founder Alon Rajic commented, “In 2023-2024, Australian businesses closed down at almost the same rate as new ones opened. In the volatile economy of the past few years, it makes good sense for businesses to identify where they could further cut costs.”

“In the current economy especially, it is understandable that business owners want to stick with a money transfer service they know and trust. What many people don’t understand is that some non-bank money transfers specialists, such as TORFX and OFX, have been in business for as long as 20 to 25 years. They are ASIC authorised, well-established and reputable.

“Being complacent about bank fees or fearful of change can cost a business. Specialist providers don’t charge extra fees and offer exchange rates well below the going mid-market rate. It pays to shop around.”

The report also underscores the robust foreign trade Australia is experiencing, with the Australian dollar being the sixth most traded currency in the world. Foreign investment hit $4.7 trillion in 2023, while international goods trade jumped another $537 million in June 2024 alone. To date, Australia’s overall international trade is worth 48 per cent of its GDP.

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Choosing the right law firm is essential to ensure you have a trusted partner who can both protect your business and help it grow. Whether it’s negotiating business contracts, filing a patent for a new product, writing employee contracts or dealing with disputes, you will need a lawyer to navigate your business journey.

Here are my top four tips for SMEs when selecting a law firm:

1. Ask around

As a first step when looking for a law firm, you should seek referrals from your SME network. Ask other small business owners in your industry about lawyers they would recommend, or not recommend, for you to work with. Speaking to someone about their own experience will give you a better idea of the service you can expect than doing desktop research.

2. Think value rather than cost

Small businesses often focus on keeping the purse strings as tight as possible until the business starts to turn a profit, which is why many avoid hiring lawyers, or select one based on low fees. However, given the importance that legal advice plays on the long-term future of your business, it’s better to select a lawyer based on their level of experience rather than the cost. Treating the legal expenses of starting up as an insurance policy for future success is a good way of putting initial advice and documentation into context.

3. Specialisation

For your lawyer to get the best outcomes for your business, it’s essential they have a deep understanding of your operations. The best way to do this is to hire someone who specialises in your industry, so they know what is most relevant to your business and can stay across any regulatory changes in the industry. Even if you aren’t looking at a specialist law firm, ask if there is someone at the firm with the speciality or an expert they can work with.

4. Ask for a fixed quote

Working on a fixed-fee basis, for specified deliverables, means that you can pose questions and research details without the risk of being charged extra fees. Don’t be afraid of a charge for a “deep consult” prior to the fixed fee on deliverables, as the quality of outcomes (making the deliverables bespoke rather than vanilla) often turns on the time you and a lawyer spend on discussing the business and key issues facing you. If an hourly-rate retainer is proposed, ensure the lawyer can demonstrate why this is of benefit to you.

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