least cost routing

AACS joins peak retail groups in seeking urgent government action on debit payment fees

The Australian Association of Convenience Stores (AACS) has joined nine other retail groups calling for urgent action on debit card merchant fees.

AACS and the other retail groups wrote an open letter to the government sharing their concerns over the cost burden of higher transaction fees in-store and online.

“Last week, AACS along with nine other industry bodies visited Canberra and Parliament House to talk to the policy makers at a ministerial and senior level to raise the important issue surrounding a Reserve Bank consultation paper that closes on 9 July,” AACS CEO Theo Foukkare told C&I in an exclusive interview.

“Our concerns relate to the Reserve Bank paper as it is suggested that their final position will not do anything to assist or drive competition for retailer debit card merchant fees which will ultimately lead to increased consumer pricing.”

The main issue relates to Least Cost Routing (LCR) which enables merchants to choose the lowest cost debit fee routing – usually EFTPOS – to minimise their costs.

“Currently the majority of debit cards in circulation in Australia have Multi Network Debit Card availability, EFTPOS plus either Visa or Mastercard. The consultation paper is suggesting that this will only be required for the big four banks and will not be required for the medium and smaller banks, which, currently accounts for one in four transactions. The medium and smaller banks will have the ability to go to a single network should they choose to, with some already having moved. The fallout from this is LCR only works on the EFTPOS platform which means that those retailers will pay up to 10 times more per debit transaction in fees.

“Some other outcomes from these proposed changes would result in no access to ‘cash-out’, no instant Medicare refund and the loss of person to person instant transfers.

“When you are with the big four banks, LCR is not easy for a retailer to activate due to red tape and barriers and complexity of the banks system. In short, the outcome is the big four banks will continue to have ridiculously large profits and they will do their best to prevent LCR, because they make more if they pay debit through a Mastercard or Visa route rather than an EFTPOS route as LCR only works when you tap a card on a terminal. It is also important to mention that if you tap your phone or a watch or online, LCR is not available.”

The associations believe that what is known as Multi Network Debit Cards should be mandatory as part of every bank’s social obligation to promote competition in Australia.

They also believe LCR should be made available as the default option for all merchants in all payment channels, including tap-and-go, mobile wallets and online transactions.

It’s important to do this across the board because an increasing number of transactions happen online and via mobile, and the same logic applies whether it’s two payment schemes on a card or in a digital wallet.

Written by James Wells

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