Cash warns banks to reduce ‘tap and go’ fees

James Eyers Senior Reporter

Jun 25, 2020

AFR

Senator Michaelia Cash has called on banks to offer retailers lower fees for contactless card payments, which have risen during the pandemic crisis, by offering “least-cost routing” to merchants.

The Financial Review Virtual Retail Summit – many retailers raised concerns with her that banks are not offering to send ‘tap and go’ payments down the cheapest payment network.

Routing payments to networks operated by Visa and Mastercard can be more expensive than using the domestic Eftpos network and it has been estimated this may be costing retailers up to $550 million a year in additional transaction fees. Least-cost routing ensures transactions are automatically processed through the network with the cheapest fees.

Senator Cash said she had written to Anna Bligh, chief executive of the Australian Banking Association, “to express my support for the RBA call for merchants to be given the option of least cost routing and encourage Australia’s largest banks to clearly offer the choice”.

While large retailers like Chemist Warehouse or McDonald’s have negotiated “least-cost routing” with their banks, overall, it is understood that only 5 per cent of retailers have successfully got their bank to put tap-and-go payments to go down the Eftpos rails.

The issue has been on the radar of the Reserve Bank of Australia. Its head of payments policy Tony Richards said in February he was frustrated banks are not proactively providing merchant customers with the cheaper payments option. RBA assistant governor Michele Bullock said earlier this month that the growing availability of least cost routing would increase competition among card schemes by pushing down interchange fees.

“Many small businesses have found that the cost of their merchant fees have now actually risen during COVID-19 as customers have swapped to contactless payments and business owners are either unaware of or have not been offered the use and the option of least cost routing,” Senator Cash said.

Most banks send tap and go payments for smaller retailers down the more expensive payments network run by Visa and Mastercard rather than the cheaper eftpos.

“While there are many many benefits to contactless card transactions, there is greater need for value for money through merchant phase,” she told the Financial Review Virtual Retail Summit.

Eftpos this week launched a six-week advertising campaign to inform merchants of their ability to reduce fees they pay to accept ‘tap’ card transactions on dual-branded debit cards by routing them away from the international payment companies. Eftpos said using its network can lead to savings of up to 40 per cent on transaction fees from debit cards.

Former executive director the Australian Retailers Association, Russell Zimmerman, will join Eftpos on July 1 to work on the least-cost routing campaign.

The RBA has found that despite least cost routing being available in a technical sense for a couple of years, most banks have not widely promoted the option for their customers. Ms Bullock said earlier this month that the RBA’s payments regulation review was considering mandating least-cost routing.