In April, the Lithuanian electronic money institution Genome decided drastic steps were needed to help its small-business customers across Europe survive the economic impact of the coronavirus pandemic.
After witnessing many of its clients having difficulties transitioning to a world based entirely around e-commerce, Genome — which provides digital financial services to help firms with setting up business operations, transaction settlement, managing merchant accounts with dedicated IBANs, and carrying out SEPA and Swift transfers — announced it was waiving all monthly account fees for the following three months.
“The decision was made based on difficulties businesses were facing with the unexpected lockdown,” said Daumatas Barauskas, Genome's chief operating officer. “We thought that businesses could spend that saved fee money on something more important like salaries, which would help the economy recover faster.”
It proved popular. In total, 634 new Genome business wallets were opened between April and July, compared with 117 wallets during the same period in 2019. But Genome was far from the only payments organisation implementing fee waivers to help customers through the difficult period. U.K.-based mobile payments company SumUp, which serves small independent merchants across the globe, waived merchant fees between March 21 and April 30 in several European markets, while Nigerian mobile payments platform PalmPay, which serves Africa, also waived transfer fees for three months.
“Nigeria is a very price-sensitive market, and so we knew that even a saving of 10 USD cents per transaction was making a big difference to our customers,” said Greg Reeve, PalmPay's CEO. “So when the pandemic hit and lockdown restrictions meant that people had to carry out a larger proportion of their payments digitally, waiving transfer fees was a no-brainer.”
But as the pandemic has stretched on further into 2020, with more lockdowns and economic disruption predicted heading into the fall and winter, continuing to offer such waivers has not always proved financially viable. In the case of SumUp, representatives told PaymentsSource that it was not feasible to waive fees for longer than six weeks, because their business model relies on this income to cover costs and maintain infrastructure. SumUp declined to comment on how merchants responded when fees returned.
Some figures have called on the payments industry as a whole to take further steps to help customers this fall. John Burgos, vice president of U.S. payments solutions provider Mindgate, said that more companies should consider waiving digital payment fees.
But for smaller fintechs, it is not always possible to do this for more than a few months.
“It depends on the company,” said Barauskas. “Companies with venture capital don’t have a problem cancelling all fees, as they can burn money on such activities. For businesses like Genome, waiving the fees for good is not a viable decision, as central banks charge fees for transactions, and we have capital requirements, so waiving all the fees will lead to losses. The mindless dive of a fintech company into fee waiving, and then that company going bankrupt will do exponentially more harm than good.”
Some companies have found ways to adapt and offer assistance while still covering their costs. In the wake of the second wave of coronavirus, Genome has canceled service fees and lowered SEPA transfer fees, but only for Lithuanian businesses. Because PalmPay makes the bulk of its money on commissions from vending airtime, bill payments and other services rather than transfer fees, it has now made the first three money transfers a day permanently free.
“The first three transfers per day cover the needs of the majority of our customers,” said Reeve. “Our transaction volumes and customer numbers engagement have all doubled or tripled since March.”
Others feel it is time for more large organizations to support small businesses in the realm of payments. While some banks and payment services providers such as PayPal have introduced fee waivers until the end of 2020 to assist with physical sales — PayPal is waiving transaction fees when customers use its app for touch free payments in shops, while NatWest bank in the U.K. has waived monthly hire fees for point of sale terminals — little has been done to help businesses shift to the digital world.
