Founders and members of the Independent Payments Forum (IPF) met with parliament recently to propose a plan to tackle card fees.
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 per cent of card purchases, or almost 12 billion transactions a year.
Brad Kelly, co-founder of IPF, said 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.
“More needs to be done to reduce the $6.9billion* 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.”
The 10-point plan below would reduce costs and surcharging on around 80 per cent of card transactions at point of sale. Recommendations include:
- 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.
Kelly, along with co-founder of IPF Warwick Ponder and members including Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), presented the plan to the Hon Stephen Jones, Assistant Treasury, the Hon Julie Collins, Small Business Minister, and Mr Jerome Laxale MP, fee campaigner. IPF also met with Opposition shadow ministers and their advisers.
Currently, Australian small businesses are paying $1.7 billion more in payments fees compared to big businesses like major supermarkets, often need to recoup these significant costs through surcharging.
Ponder said the current situation is made worse by wide-spread 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.
“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.”
*Average merchant fee of around 0.45% for debit cards and around 1% for credit cards. The Cost of Card Payments for Merchants, RBA, September 2022. At current levels, Debit $584b * 0.45% = $2.628b and Credit $425b * 1% $4.25b = $6.9 billion
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