Reserve Bank governor Philip Lowe took banks and other financial institutions to task yesterday for their tardiness in making services available that are designed to enhance competition, improve functionality and lower costs in the payments market.
Speaking at AusPayNet’s 2022 Summit in Sydney yesterday, Lowe said some financial institutions have work to do to complete their rollout of in-store least cost routing for merchants, which gives the merchant a choice of debit networks.
And he said only one of the major banks has met the previously agreed timeline for the implementation of NPP Australia’s new PayTo service.
“They have not met the expected [LCR] timetable. To provide greater transparency on how individual institutions are progressing, the RBA will next year start publishing institution-level data on LCR availability and take-up,” Lowe said.
He said that for online payments, the Payments System Board expects LCR to be available by the end of this year. Again, some payment service providers are running behind.
Lowe said several developments are working to add cost to the payment system and the RBA’s focus is to address these issues.
There is a shift to higher-cost international scheme debt cards and away from eftpos. On average the international debit schemes add more than 20 basis points to merchants’ cost of acceptance.
The shift to online commerce is another factor. Merchants typically face higher payment costs for online payments.
And greater use of mobile wallets, offered by Apple Pay, Google Pay and Samsung Pay, often involves higher charges for merchants to accept.
“We are optimistic that LCR will help counter the forces that are adding to merchants’ payment costs,” Lowe said.
The “next frontier” is LCR for in-store mobile wallet transactions. Lowe said: “Over the past few months, the RBA has been consulting with the major wallet providers, issuers, acquirers and terminal providers. On the basis of this consultation, the Payments System Board has formed the view that it would be both feasible and desirable for the industry to deliver LCR functionality for mobile wallet transactions by the end of 2024.”
He said the next step is for mobile wallet providers to finalise their plans are share them with the industry.
On the PayTo issue, Lowe said slow progress by the major banks imposes a cost on the rest of the industry.
“The new agreed timeline to complete the necessary work is April 2023. The RBA expects this timeline to be met,” Lowe said.
The pressure to support the implementation of NPP services PayID and PayTo has been given added impetus in recent months because they are considered to have safety features that enhance consumer protection.