card payments


In our April column from the ARA, executive director Russell Zimmerman advocates for a fairer payments playing field.

With the rapid development of technology in the retail industry and the constant rise of online retail, the Australian Retailers Association (ARA) continues to advocate for payments reform to promote a more innovative, competitive and lower cost payments system across the Australian retail industry.

As Australia has one of the highest adoption rates of contactless payments in the world, the ARA believes low-cost routing for tap-and-go payments, obscure regulation and online card fraud continue to be significant issues for retailers already struggling with high costs affecting the viability of the sector.

To support our members on this critical issue, we have released our submission to the Productivity Commission’s (PC) inquiry into competition in the Australian financial system. With tap-and-go payments representing more than two-thirds of card payments in Australia, the findings of the PC’s draft report show that retailers are struggling to manage the high costs associated with Australia’s current payments system.

Consumers expect retailers to adopt innovative, seamless and efficient payment options; however, retailers are often the ones left with the cost burden. Therefore, the ARA’s submission highlighted the need for low-cost routing options for merchants, as retailers shouldn’t be disadvantaged for accepting card payments from customers.

In addition to this, McLean Roche Consulting has estimated the current routing system for dual network card transactions is costing our economy in excess of $558 million in additional costs. Therefore, the ARA encourages all retailers to put signage in their stores stating the high costs associated with dual-network card transactions and request all banks and financial institutions to allow merchants to route their transactions via the preferred network.

Various banks including NAB and Tyro have already made the switch to least-cost routing options for merchants to support retailers across the country. Other banks have recently promised they will roll out low-cost payment routing options for retailers over time, however the ARA will support regulatory action from the Reserve Bank’s Payments System Board if the banks don’t implement these payment options in the next six months.

The cost of fraud

Another key issue for retailers trying to compete in the e-commerce space is online fraud, as fraud mitigation technology costs are often too high for retailers to adopt. With the rise of online transactions, retailers are facing considerable losses from online fraud, and the ARA is concerned Australia will become a bigger target for cyber criminals.

The ARA and the Australian Merchant Payments Forum (AMPF) have been advocating for a two-factor authentication system to assist retailers in tackling online fraud. These extra-authentication steps will assist retailers in identifying consumers who do not satisfy specific data requirements when making a purchase. The ARA will continue to advocate for an industry-backed, mandatory solution, which will provide consistency, lower costs, and most importantly, reduce online fraud for Australian retailers.

Better interchange regulation needed

Although it would be desirable to remove interchange fees in an ideal world, the ARA is concerned that the total removal of interchange fees would place extra strain on retailers. For example, if interchange fees are completely removed, banks may no longer be able to support loyalty points, driving consumers to use other payment systems like American Express, which would cost retailers a higher merchant service fee.

Therefore, the ARA is not advocating for the total removal of interchange fees. Instead, we believe better interchange regulation is needed to limit the high costs of accepting international card payments, and believe these fees should be kept as low as possible. Considering eftpos, MasterCard and Visa transactions are subject to interchange regulation, we believe it’s past time for international schemes like American Express and China UnionPay to be regulated as well.

The ARA will continue to seek support from the Reserve Bank of Australia and other stakeholders to assist in levelling the playing field for the Australian retail industry.

Read the ARA’s full submission to the Productivity Commission.

Russell Zimmerman is the executive director of the Australian Retailers Association


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