BANKS LOBBY ACCUSES APPLE, CREDIT CARD GIANTS OF PAYMENTS FREE-RIDE

The country’s powerful banking lobby has accused Apple of free-riding on investment in the payment system and described the fees charged by Visa and Mastercard as complex and opaque in a significant escalation in a long-running stoush between the global giants and major Australian lenders.

The claims were made by the Australian Banking Association in a submission to a parliamentary inquiry after years of disquiet among domestic financial institutions over what they say are unfair Reserve Bank of Australia regulations that do not apply to their international rivals.

Payments through Apple Pay have a cost that the RBA has not been able to regulate, until now.

Max Mason-Hubers

A parliamentary inquiry this month is examining whether Apple, Visa, Mastercard, along with Google and American Express, should be more tightly regulated.

Major Australian lenders led by the Commonwealth Bank have long argued that those companies face few obligations to fund infrastructure maintenance, security, fraud controls and dispute handling.

In its submission, the ABA said large technology companies such as Apple “leverage this infrastructure, and monetise activity occurring on it, without comparable obligations to fund the underlying system”.

“Australian banks and other domestic players have done the heavy lifting to fund and build some of the safest and most advanced payments infrastructure in the world,” Australian Banking Association chief executive Simon Birmingham said in a statement.

“It’s critical we preserve the ability of domestic players to continue to invest in our payments system – or we risk enabling an inevitable offshoring of these capabilities.”

Banks process billions of dollars of payments every year, but say they are lumped with a disproportionate proportion of the costs of maintain those systems. Louie Douvis

Under changes proposed by the RBA, revenue from interchange fees earned by banks for issuing cards will be reduced by almost $1 billion, exacerbating the imbalance between domestic institutions and the big technology companies.

Australian businesses pay around $7.3 billion in payment fees a year on $1.1 trillion of goods.

Around $2 billion of this goes to the Visa and Mastercard “schemes” – fees that the banks argue are “complex, opaque, and difficult to constrain through normal market forces”.

The ABA argues that the RBA should not change interchange fees for now, but instead use new powers to look at the entire system.

“It is important that substantive decisions taken in the near-term leverage new powers and expand the focus beyond the traditionally regulated components of the system,” the association wrote in its submission to the inquiry.

Banks said a lower interchange fee cap proposed by the RBA will result in credit card transactions being loss-making.

Fees paid by banks to Apple, for putting payments through Apple Pay, represent around half the cap.

That leaves 0.15 per cent for all other costs, including transaction processing, fraud prevention, disputes, chargebacks and compliance.

The Independent Payments Forum, which represents small businesses, said that the RBA’s plan to cut interchange fees will still leave about $6 billion in fees on the table, with no ability to recoup costs via surcharges.

The central bank said it is open to targeting the platforms.

On Friday, appearing before the parliamentary committee, RBA governor Michele Bullock said the review of card payment costs and surcharging will be published by the end of March.

She said the RBA would consult on whom to pursue under new laws that provide it with power over American Express, mobile wallets, buy now, pay later providers and e-commerce platforms for the first time.

New technology – artificial intelligence-powered systems, in which agents conduct shopping tasks – is expected to add more costs for sellers.

For example, Shopify merchants are paying OpenAI a 4 per cent fee on sales made through ChatGPT, on top of the fees charged by the platform itself.

The banks’ submission to the inquiry points to reporting that showed Apple paid $153 million of tax in Australia despite $12.5 billion of revenue in 2024, while Visa and Mastercard paid just $3 million combined.

In comparison, the four major banks paid taxes that totalled around $10 billion.