The Reserve Bank of Australia’s (RBA) suggestion last week to subject EFTPOS interchange fees to the same regulation as Visa and MasterCard’s debit cards has been met with some concern.
Chairman of the Australian Payment Merchants Forum (AMPF) and ARA executive director Russell Zimmerman said interchange fees are typically paid by merchants to card issuers to fund the costs of cardholder benefits but RBA’s suggestion would increase the cost of EFTPOS transactions for all Australian retailers.
"Currently, Visa and MasterCard interchange fees are regulated to be an average of 12c per transaction but it’s difficult to understand why card issuers should receive 12 cents for each EFTPOS transaction.
"Debit cards are a mature product and the cost of processing transactions using EFTPOS is minimal. In fact in New Zealand, whose banking market is dominated by the major Australian banks, debit card payments at retailers do not attract any interchange fee.
"Consumers, who use less costly payment instruments, including EFTPOS cards, effectively subsidise consumers paying with more costly payment instruments like scheme-branded credit and debit cards. The RBA’s latest proposal will price every debit card payment at the highest existing rate," said Zimmerman.
Zimmerman added that earlier this year a group of financial institutions and retailers formed EFTPOS Payments Australia Limited (EPAL) to invest in and promote Australia’s EFTPOS network but the RBA’s latest proposal could hinder EPAL’s prospects of success.
"Any move to alter the current EFTPOS interchange regulation to come in line with scheme debit cards will cost retailers as they will be charged far more heavily to use the EFTPOS system for transactions. If this course of action is pursued, the RBA will virtually hand the debit market to MasterCard and VISA by making it uneconomical to invest in the EFTPOS system.
‘"The RBA had previously stated it would regulate to reduce credit card interchange fees if the industry did not adequately address the RBA’s concerns. Clearly these concerns have not been resolved to the RBA’s satisfaction, yet the RBA has not followed through on its threat to lower credit card interchange fees," said Zimmerman.