Uncontrolled debit fees adding $12 to a school laptop, and $6.40 for a car service
Canberra, 10 October 2024: A list of initiatives to reduce the cost of living were presented to the Government in Canberra today, aiming to slash the price of items purchased on billions of debit card payments at Aussie businesses, and significantly reduce surcharging.
Independent Payments Forum (IPF) members joined co-founders Brad Kelly and Warwick Ponder to present the plan to Assistant Treasury, the Hon Stephen Jones, Small Business Minister, the Hon Julie Collins and fee campaigner Mr Jerome Laxale MP.
IPF also met with Opposition shadow ministers and their advisers.
The 10-point plan presented by the forum would significantly increase accountability and reduce the cost of debit card payments, which are by far the preferred retail payment method in Australia, accounting for 79% of card purchases, or almost 12 billion transactions a year.
“Cost of living pressure is a priority focus for Australian consumers and small businesses, and reducing the cost of card payments is an effective way to reduce costs on billions of purchases,” IPF co-founder, Brad Kelly said.
“More needs to be done to reduce the $6.9billion1 in card fees charged by Australia’s banks, payments platforms and card companies for providing simple card payment services to retailers and merchants.
“The lion’s share of this fee burden for card payments in Australia is currently shouldered by small businesses and their customers due to unfair pricing constructs, particularly for debit cards, which are marketed by banks to consumers as an alternative to cash to access their own money.
“Unfortunately, this ‘cash replacement’ positioning has been allowed to continue without adoption of appropriate policies, that benefits users and reduces costs.”
IPF member and CEO of the Australian Association of Convenience Stores, Theo Foukkare said: “The high cost of these card fees impacts all Australian families and small businesses every single day.
They result in higher prices at the register, reduced margins, less competition and surcharges.”
While the actual cost of average debit card transaction today is about 20c, fees for
small businesses can look like*:
o 64c for $40 worth of fish and chips at the local shop.
o $1.28 for a $80 haircut and shave.
o $1.60 on a $100 shop at a small business.
o $3.20 on a $200 family restaurant meal.
o $6.40 on a $400 car service.
o $12 for a $750 gaming console or school laptop.
Australian small businesses are currently paying $1.7 billion more in payments fees compared to big businesses like major supermarkets, and often need to recoup these significant costs through surcharging.
Small business also subsidises special pricing deals offered to large retailers, most of which are not transparent.
IPF co-founder Warwick Ponder said the current situation is made worse by widespread practices including fixed, blended and bundled pricing which result in cross subsidisation of high-cost credit cards being paid for by people who choose to use cheaper forms of payment such as debit cards and cash.
“Small merchants must be allowed to recoup transactions costs to remain competitive if big businesses, including supermarkets, continue to get sweetheart deals and don’t need to charge customers to recoup costs,” Mr Ponder said.
“Some argue that big business deserves better rates due to their scale, but in payments there is currently an extreme disparity that sees bigger players getting deals at close to zero.
“Australia has an opportunity to become a world leader in fair card payment regulation. Unfair fees on card payments can be reduced easily in Australia with simple policy changes.”
The 10 point plan included recommendations to:
- Mandate least cost routing for debit cards on all platforms, including mobile and
online for every transaction, with savings passed onto merchants by acquirers
with transparency - Prohibit fixed, blended and bundled pricing
- Separate credit from debit surcharging
- Harmonise all Point-of-Sale debit fees, including on mobile
- Cap interchange on domestic debit <$50 at $0 and >$50 at $0.01, and scheme fees at 15c. Publish wholesale cost of acceptance for debit cards, including scheme fees quarterly.
- Mandate opt-in merchant surcharging for debit on terminals
- All card fees, including scheme fees, are transparent and published on the RBA website in real time, in plain English
- Provide SMEs permission to collectively bargain on payments fees
- Ensure any new retail debit platforms that replace debit cards are regulated and low cost
- Recognise debit is the new cash.
The above actions would reduce costs and surcharging on about around 80% of card
transactions at point of sale.
Media contacts
Warwick Ponder, 0408 410 593
Brad Kelly, 0411 816 150
Gabby Taylor, 0448 738 114
Theo Foukkare, 0423 003 133
About Independent Payments Forum
We aim to affect real change in the payments system by listening, working with, and representing the voices who go unheard. Our mission is to amplify those voices and promote a fair and competitive payments landscape in Australia.
https://ipforum.com.au
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