PAYMENTS FORUM ON ATTACK ON INTERCHANGE

Interchange will be in the spotlight in the Reserve Bank of Australia’s upcoming review of payments fees and payments regulation.

One influential lobby group has placed interchange front and centre in its submission, one the Independent Payments Forum sums up as “a plan to cut $3 billion in card and mobile payment fees.”

In a submission to the Reserve Bank of Australia later this month, the IPF says it will detail a proposal “to slash all the major fees associated with debit and credit card and mobile transactions that currently cost Australians $6.4 billion a year.

“The majority of this massive cost burden is currently borne by small businesses and their customers who are often forced to pay three to five times more for card transactions than big retailers” IPF co-founder Warwick Ponder said.

Key elements of the Independent Payments Forum plan include:

•    Zero interchange on debit transactions under $50, and interchange fixed at one cent on higher value payments.
•    Capping interchange on credit card payments.
•    Capping scheme fees charged by card networks, and margins levied by banks and platforms
•    Separate debit and credit card pricing “to stop cross subsidies to premium cardholders”.
•    Mandate debit card and standard credit card transactions are dynamically routed to the least cost network unless merchants opt out, and the benefits are passed on.
•    Rewarding online merchants for fraud mitigation with lower fees.
•    Mandated collective bargaining for SMEs on fees.
•    Allowing surcharging for select merchants “who continue to pay more than 200 per cent of the lowest market rates.”

In 2018, the Productivity Commission called for a ban on interchange, noting “the case for interchange fees to fund reward programs or to redistribute benefits on a transactions basis from the merchant’s bank to the customer’s bank is feeble.”

Industry talk suggests that the RBA is leaning, at the very least, towards a drastic reduction in interchange, to a cap of a few cents at most.

IPF’s data analyst Peter Drennan said: “There are 47 million debit cards in this country, making almost 12 billion transactions a year.

For most Australians, debit cards are the new cash and fees should be low.

“Despite rapid growth in debit card transactions, debit card fees have defied network economics and remained stubbornly high over the past decade, even with standard regulatory intervention on interchange rates.”

IPF co-founder Brad Kelly said low debit card fees at retailers should be seen as part of the payment’s industry’s social license to operate in Australia and provide their customer’s access to their hard-earned money.

“Australia is a world leader in the take up of card and mobile transactions, with 15.1 billion card payments worth $1 trillion a year,” Kelly said.

“We now need world-leading regulation to ensure costs are minimised, particularly on debit cards where people are using their own money to pay for everyday items like food, fuel, pharmaceuticals, bills and clothing in a cost-of-living crisis.”

Kelly said the IPF “expected to see a lot of noise over the coming months as players in the payments industry moved to protect their card fee profits.

“Some players would even claim pricing constructs such as blended rates were a payments ‘innovation’, while others will demand all Australians should be footing big bills for copycat products, standard maintenance and global investments, much of which were made decades ago.

“High prices for basic card payments on networks that have existed for decades should not be mistaken for innovation,” Kelly said.

“True innovation solves real problems for consumers and merchants for which they are willing to pay for separately.”

IPF participants include the Australian Hotels Association, the Australasian Association of Convenience Stores, MGA Independent Businesses Australia, the Australian Restaurant & Cafe Association, Australian Lottery and Newsagents Association and the Australasian Convenience and Petroleum Marketers Association.

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