Move over Visa and Mastercard, a cheaper way to pay for coffee is here

Friday, 14 October 2022

Ben Lynch is the founder of Dolla, a new domestic phone app that allows people to make direct payments to small businesses, like cafes, at a fraction of the cost of the Visa and Mastercard payments system.

Ben Lynch is signing up cafes, food trucks and farmers markets to his app-based payments system which he hopes will rapidly win market share from Visa, Mastercard and Eftpos.

Users like cafes and their customers connect their bank transaction accounts to Dolla to make and accept payments more cheaply than through the Visa and Mastercard systems.

Lynch reckons a busy cafe could save $20,000 or more a year, if all its customers paid by Dolla.

As a marketing stunt to encourage cafes and their customers to start using Dolla, Lynch has announced October 28 will be “Dolla Day”, on which Dolla payment-accepting cafes can sell coffees to Dolla users for $1. Akahu, the technology business behind the app, will make up the difference on the usual price.

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Ben Lynch, founder of Dolla, has been signing up cafes, food trucks and farmers markets to his app-based payments system.

Dolla, which has been trialled at cafes including the Farmer's Daughter in Matakana, north of Auckland, where Lynch lives, is backed by Westpac, which owns 30% of Akahu.

Lynch hopes that will give comfort to Dolla users, especially as the app requires users to break normal bank terms and conditions.

In order to make payments via Dolla, users have to give Dolla permission to make payments on their behalf, which technically breaches banks’ terms and conditions.

It was a workaround that would not be necessary if banks had developed the API technology to allow apps like Dolla to directly engage with bank systems, Lynch said.

These APIs were key to ushering in an era of “open banking”, which is a term signifying clever tech companies building consumer-friendly money management and payment apps giving people more control over their banking, and potentially driving the cost of banking down.

But open banking has been on go-slow in New Zealand, and Lynch said banks had been dragging their heels on API’s.

Payment apps like Dolla were already available overseas where open banking was more advanced, Lynch said.

“New Zealand’s just playing catch-up,” he said.

Bank of New Zealand was the most advanced among the big banks on developing API gateways, but it had “gone dark” in negotiations with Akahu, he said.

Dolla has been trialled at the Farmer's Daughter in Matakana, north of Auckland.

All Dolla did was unlocking the interbank payments “rails”, which banks used to transfer money between themselves.

“We’re just here to offer an alternative way to pay for Kiwis. Visa and Eftpos and Mastercard have been around a long time,” Lynch said.

Dolla works by allowing users like cafes to generate payment QR codes that customers scan to make the payment.

Lynch said most smaller hospitality businesses paid between 2% and 3% of sales revenue in merchant service fees.

The high merchant fees led the Government to pass a law to regulate them, and on November 13, the caps come into force.

The high merchant fees paid by retailers and hospo businesses have been used by banks to fund credit card rewards schemes, and the caps have forced banks to make their schemes less rewarding.

Dolla is not the only payments service that has got Visa, Mastercard and the banks in its sights.

Australian Zepto said last week it was expanding into New Zealand.