(21 November 2017 – Australia) The Reserve Bank of Australia (RBA) has warned bank of additional regulation should they fail to respond to business concerns over the increased cost to merchants from tap-and-go payments made on debit cards.
With contactless payments increasing in popularity at the point-of-sale for consumers, and one in three businesses nominating it as a payment priority over the next two years (according to East’s 2017 Australia Merchant Payments Program), the retail industry says costs from processing purchases made on debit cards have risen by hundreds of millions of dollars.
Those costs are incurred as processing is executed via major credit card service providers, Visa and Mastercard system’s rather than a lower cost eftpos network.
The RBA board said it “strongly supported” the calls to provide merchants with what is known as “least-cost routing” of contactless payments through the eftpos network.
“It [the board] requested the bank staff to continue to engage with the payments industry on this issue, recognising that a prompt industry solution was preferable to regulation,” said the board.
East’s merchant payments program shows that average fees for a Visa or MasterCard transaction was around 0.6 percent of the transaction, compared with 0.26 percent for eftpos according to the central bank.
The Australian Retailers Association chief executive Russell Zimmerman welcome the RBA’s stance, saying, “For the Reserve Bank to pull the stick out and hold it up there and say, we will regulate if you don't fall into line, shows the seriousness of the problem.”
The ARA last month estimated the current system was adding more than $290 million in payment costs, and Mr Zimmerman said he now believed the cost was burden was “much higher” than this.
The RBA's payment systems also noted recent bank moves to stop charging ATM fees to customers of other banks. It pointed out the declining use of ATMs, and said there “may be scope for consolidation or fleet rationalisation that results in a more efficient and sustainable ATM industry while still maintaining broad access to ATMs”.
ANZ Bank has promised to give merchants the option to have debit card payments sent through the cheaper eftpos network, while National Australia Bank was said it was “talking to a client about it”. The other major banks haven’t committed to offering the service to merchants.