Australian banks strongly support banning debit and credit card surcharges but want the Reserve Bank to rethink its proposed cap on the fees merchants pay card issuers.
The RBA in July proposed banning the surcharges that some merchants charge customers for accepting credit and debit cards, while offsetting that cost for businesses by reducing the fees they have to pay to customers’ card issuers.
The Australian Banking Association said in a 70-page submission to the RBA on Tuesday that Australia’s surcharging framework was “clearly broken” and needed reform.
“While surcharging may have been merited in the past, it has become increasingly burdensome, opaque and arbitrary for Australian consumers, and detached from its original objective of driving greater market efficiency,” the association said.
ABA CEO Simon Birmingham said consumers should have certainty at the checkout and a ban on surcharges was long overdue.
But the RBA’s proposal to limit Australia’s already low fees that merchants pay card issuers would “amount to the most far-reaching transformation of payment economics in two decades, without an evidentiary basis that they will achieve the promised outcome”, the ABA said.
The RBA’s proposal to reduce the cap on these “interchange fees” from 0.8 per cent of transaction value for domestic credit cards to 0.3 per cent would backfire on households while hurting businesses, the ABA said.
It would benefit multinational payment technology and payment companies, the banking association said. In the case of Apple Pay, new interchange cap would siphon a substantial portion of the fee earned on wallet transactions offshore.
The reduced interchange free cap would also likely lead to card issuers reducing the benefits they offer consumers, such as the interest-free periods that many of Australia’s 17 million cardholders use to manage their bills between pay cycles, the association said.
There are more targeted ways of addressing the RBA’s fairness concerns about the impact of interchange fees on small businesses, the association said.
While the ABA supported the ban on surcharges, it questioned whether the move would result in savings for households because merchants would simply raise prices.
The RBA’s approach “treats a bookkeeping change in how costs are recovered as if it were a real income gain for consumers, which is not the case”, the ABA said.
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