Retailers have welcomed the new card payment provisions made by the Reserve Bank of Australia (RBA) Payments Systems Board, but say there are still flaws in the current system that need to be addressed.
The new card payments reforms will be applied in a two stage implementation; commencing on September 1, 2016 for large merchants, and September 1, 2017 for small businesses.
The new standard will ensure consumers using payment cards from designated systems including Eftpos, the debit and credit systems of Mastercard and Visa; and the American Express companion card system; cannot be surcharged in excess of a merchant’s cost of acceptance for that card system.
Under the guidelines, merchants will also not be able to impose high fixed-amount surcharges on low-value transactions, as has been typical for airlines.
The weighted-average benchmark for credit cards has been maintained at 0.50 per cent, while the benchmark for debit cards has been reduced from 12 cents to 8 cents.
The weighted-average benchmarks will be supplemented by ceilings on individual interchange rates which will reduce payment costs for smaller merchants.
The RBA has defined a large merchant to be one that satisfies at least two of the following requirements: it has consolidated gross revenue of $25 million or more, the value of its consolidated gross assets is $12.5 million or more, or it employs 50 or more employees.
Competition watchdog to commence surcharge compliance role from September 1, 2016
The Australian Competition and Consumer Commission (ACCC) will begin enforcing the ban on excessive surcharges for large merchants from September 1, 2016.
ACCC chairman, Rod Sims, said the ACCC will focus on education and awareness in the initial stages but says it “won’t turn a blind eye to possible breaches, particularly for those large businesses clearly on notice of these changes”.
“In short, the new provisions will limit the amount businesses can surcharge customers for use of payment methods such as most credit and debit cards. The limit will be linked to the direct costs of the payment method such as bank fees and terminal costs,” Mr Sims said.
“The ACCC is finalising online guidance material for consumers and businesses, which will provide further information on the ACCC’s enforcement role, what businesses need to do in order to comply, and how consumers can make complaints if they believe a business has charged a payment surcharge that is excessive.”
The ban has no effect on businesses that choose not to impose a payment surcharge, such as the many businesses in Australia that incorporate payment system costs into their overall prices.
“A step in the right direction,” says ARA
The payment reforms have been welcomed by the Australian Retailers Association (ARA) which has been working with the RBA in seeking to reduce merchant fees and aiming to have credit cards such as American Express and Diner’s Club regulated.
“The capping of premium card charges at .80 per cent and the more regular weighted average benchmark setting at .50 per cent will drive lower costs for retailers,” ARA executive director, Russell Zimmerman, said.
“Retailers do not like passing on surcharges to consumers and where costs are reasonable on payments systems, retailers don’t surcharge. Both parties will benefit from lower costs as a result of these changes.” Mr Zimmerman said.
The ARA said the outcome is a step in the right direction, although there are flaws that remain in the current system which must be addressed. The ARA said the greatest of these issues is the lack of regulation on the very high cost and new payment systems coming on to the market.
“Through the efforts of the ARA over many years, we have been able to reduce costs on the three regulated payment schemes; Eftpos, Visa and Mastercard. This has resulted in very little, if any, surcharging on these payment systems,” Mr Zimmerman said.
“It is interesting to note that Amex are running a campaign suggesting retailers do not to surcharge on their cards, but instead accept substantially higher costs which inevitably get absorbed by merchants and consumers.”
“Merchants who are affected by the payments system will be seeking to reduce costs and create efficiencies,” Mr Zimmerman said.
The ARA is advocating for the regulation of all card schemes to reduce costs on all cards. Retailers are encouraged to support this position by refusing to accept high cost cards and surcharging, and discouraging acceptance of the high cost payment schemes.
Consumer advocate says uncertainly still remains
Consumer advocate, Christopher Zinn, who is currently spearheading the Surcharge Free movement which urges businesses to end payment surcharges, says uncertainty remains around surcharging card payments for smaller everyday purchases.
“Additionally, the RBA guidelines do not engage with consumers’ negative feelings toward surcharging or the detrimental impact the practice can have on customer loyalty and advocacy for businesses of all sizes.”