RBA initiates review into merchant card payments

According to the RBA, many merchants are surcharging consumers due to card payment costs. Analysing these trends and figuring out a solution is the goal of this review.

“Australians use cards extensively to pay for goods and services and benefit from the convenience and security provided by card payments. However, in an environment of heightened concern around the cost of living and ongoing changes in payment preferences, merchants and consumers are increasingly focused on card payment costs and surcharging,” said the RBA in a statement.

“These two issues are linked as merchants would be less likely to surcharge consumers if card payment costs were lower. Accordingly, it is timely to review whether the RBA could do more to put downward pressure on merchant card payment costs by promoting competition and efficiency and whether the RBA’s surcharging framework remains fit for purpose. This review also recognises that some years have now passed since the surcharging framework was introduced.”

To gather opinions and reach a conclusion on the matter, the central bank is asking stakeholders 15 questions:

1. Is there a case for lowering the level of interchange benchmarks or caps? Should the difference between the interchange fees paid by big and small businesses be limited in some way?
2. Should interchange regulation be extended to foreign card transactions in Australia?
3. Is there a case for reducing the complexity, and/or enhancing the transparency, of interchange fees? If so, how?
4. Is there a case for further transparency of scheme fees to promote efficiency and competition? If so, what additional information would be beneficial?
5. Is there a case for regulatory action to reduce the complexity or growth of scheme fees? If so, what form should this take?
6. What other regulatory action should the RBA consider to increase the competitive pressure on scheme fees?
7. How do stakeholders assess the functioning and effectiveness to date of LCR for in-person transactions? Is further regulatory intervention needed? What might that look like?
8. Is there a case for greater transparency of fees, wholesale costs, and market shares for some payment services? If so, what form should this take? What benefits or drawbacks might arise from implementing any of these measures?
9. Should PSPs be required to provide individual merchants more detailed information on their regular statements (or through other channels)? How could this information be presented without creating additional complexity for merchants?
10. Should PSPs be required to publish standardised information on their pricing and services for merchants (in line with reforms introduced in the UK)?
11. What other regulatory measures should the RBA consider to improve competition between PSPs?
12. Is there a case for revising the RBA’s surcharging framework? If so, which options or combination of options would best address the current concerns around surcharging? What other options should the RBA consider?
13. What are the implications for merchant payment costs from changes to the surcharging framework? Could the RBA address these with other regulatory actions?
14. Are there any other regulatory actions that the RBA should consider taking in response to the issues raised in this paper?
15. Are there any issues in, or implications for, the broader payments ecosystem that the RBA should be aware of when designing a regulatory response to any of the issues discussed in this paper?

Katie Wilson, head of policy at FinTech Australia is cautious on the potential of this reform: “While FinTech Australia welcomes any policy that works towards the betterment of consumers, we’re concerned about the broader implications of fully stamping out surcharges for debit cards.

“Any proposed policy reform needs to be carefully considered to ensure it supports competition and innovation in payments. Without this, small businesses lose the right to choose how to allocate their costs and we risk jobs and innovation in the fintech industry, to consumers’ ultimate detriment.”

The RBA will need to take all opinions into account to achieve a successful review. Submissions should be provided by 3 December, after which the RBA will further consult on any reform proposals prior to any decisions being made.

[Related: RBA’s Term Funding Facility ‘delivered on its goals’]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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