The Independent Payments Forum (IPF) has announced a plan to cut $3 billion in card and mobile payment fees from the Australian economy.
Later this month, IPF will submit a proposal to the Reserve Bank of Australia to slash all the major fees associated with debt and credit card and mobile transactions, which are currently costing Australians $6.4 billion a year.
Warwick Ponder, Co-Founder of IPF, said 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.
“Any move to ban surcharging without addressing this imbalance in fees charged to small businesses will likely result in increased prices and job losses.
“Unfair card fees make it very difficult for small businesses to compete in industries with low margins, heavy competition from large businesses like supermarkets and regulated pricing such as pharmacies and newsagent lotteries.”
Key elements of the plan include:
- Zero interchange on debit transactions under $50
- Cap scheme fees charged by card networks and margins levied by banks and platforms
- Separate debit and credit card pricing to stop cross subsidies to expensive 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
- Reward online merchants for fraud mitigation with lower fees
- Mandated collective bargaining for SMEs on fees
- Slash non-premium credit card fees
- Allow surcharging for merchants who continue to pay more than 200 per cent of the lowest market rates
Peter Drennan, Data Analyst at IPF, explained that there are 47 million debit cards in this country, making almost 12 billion transactions a year, and 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.”
Brad Kelly, Co-Founder of IPF, 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.
“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 also expects to see a lot of noise in the coming months as players in the payment industry moved to protect their card fee profits, and suggested some players would even claim pricing constructs such as blended rates were a payment 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. True innovation solves real problems for consumers and merchants for which they are willing to pay separately,” said Kelly.
IPF participants include The Australasian Association of Convenience Stores (AACS), MGA Independent Businesses Australia, The Australian Restaurant & Cafe Association (ARCA), Australian Hotels Association, Australian Lottery and Newsagents Association (ALNA) and the Australasian Convenience and Petroleum Marketers Association (ACAPMA).
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