Visa and MasterCard rail against RBA intercharge review
(17 February 2020 – Australia) Visa and MasterCard have warned the Reserve Bank of Australia (RBA) against squeezing debit and credit card fees further, asserting the move will harm challenger banks unnecessarily and increase cybersecurity risks by diverting much needed investment in the payments system.
The response came in the wake of Australian regulators considering intervention to stop banks using Visa and Mastercard as their default debit card payment routes. In a submission response to the RBA's recent payments regulation paper, MasterCard argues interchange fees have already been slashed too far. Visa and Mastercard are concerned the RBA could set an international precedent driving fees even lower, after stricter caps were mandated in 2017.
RBA head of payments Tony Richards is reviewing regulation of the payments system alongside other key issues such as allowing merchants to pass through to their customers the costs of providing buy now pay later (BNPL) services and least cost routing (LCR). LCR refers to banks automatically allowing merchants to switch contactless payments to the cheapest system which would route more receivables flows to the lower cost Eftpos network.
MasterCard criticised the major banks' ownership of Eftpos, BPay and the new payments platform, which allows direct account transfers to be made in real-time while also seeking greater transparency around merchant service fees (MSF) reporting.
Notably ANZ and CBA have recently lodged submissions with the RBA’s review of payments regulation suggesting the current complex intermesh of payments schemes and legacy infrastructure needs to be integrated into a singular industry wide platform. After providing the core infrastructure that powers direct bank debit account transactions and ATMs for the last 50 years, a once in a generation consolidation of payments platforms is edging closer.
“Further interchange restrictions would assist major banks by significantly reducing competition and negatively influencing Australia’s reputation as an innovative nation” Visa stated.
"The current regulatory and policy framework is inhibiting the ability of neobanks and fintechs to issue cards. Regarding the regulation of card schemes, it is clear regulation is distorting the market, most notably in the areas of least cost routing, interchange and surcharging” MasterCard said.
"The right to surcharge allows the merchant to signal to customers that particular payment method was more or less costly. Implementing this principle consistently across payments methods would minimise the risk that customers using low cost payment methods cross-subsidise customers choosing to use high cost payment methods" ANZ stated in response to the RBA’s consideration to prevent ‘no surcharge’ rules being imposed by on merchants by BNPL providers such as and Zip Co and Afterpay.