National retail and small business groups have vowed to intensify pressure on the Reserve Bank to mandate all banks to provide least cost routing on debit transactions after Treasurer Josh Frydenberg intervened in support of their campaign.
The RBA’s Payments System Board has repeatedly baulked at forcing the major banks to implement least cost routing to help reduce the acceptance costs of merchants when customers initiate a contactless debit card payment.
Small business leaders yesterday rallied behind Frydenberg’s call, which comes as the RBA finalises a reform agenda flowing from its review of retail payments.
Business groups such as the small business council (COSBOA) and the National Retailers Association said they were shocked in May when the RBA published the preliminary findings of the review that included a preferred option not to mandate least cost routing in the banking industry.
That finding triggered an intense lobbying campaign in Canberra by business groups, which was coordinated by an umbrella body known as the Fairer Merchant Fees Alliance.
Members of the Alliance included COSBOA, Master Grocers Australia and the Australian Convenience and Petroleum Marketers Association (ACAPMA).
COSBOA chief executive Alexi Boyd said the treasurer’s intervention marked a turning point in the long-running battle for retailers to secure access to the cheaper Eftpos platform.
“Merchant fees is such a complex topic involving obscure technical terms and concepts, powerful multinationals, and multiple regulators,” she said.
“The average small business person can’t be expected to understand it and it’s easy for the major players to create smoke and mirrors to ensure they aren’t even aware the impact it’s having on their business.
“The easiest, simplest solution for all involved is to recognise the impact on small businesses and make the foundation of all decisions to mandate least cost routing as the default.”
ACAPMA chief executive Mark McKenzie yesterday welcomed Frydenberg’s intervention, noting also that the PSB was also being urged to stamp out the rising practice of banks issuing single network debit cards, which makes least cost routing impossible.
“Service station owners, nearly two-thirds of which are small to medium businesses, are now paying an estimated $116 million in card transaction fees – double what it was in 2016 – just to process the card payments of fuel customers via their payment terminal,” McKenzie said.
“This increase is extraordinary with much of it due to banks taking advantage of the lack of transparency of a complex payments system and quietly routing payments down the generally higher cost international card gateways (VISA and Mastercard) - as opposed to the generally lower cost domestic ‘Eftpos’ system – because they earn more money that way.“
National Retail Association chief executive Dominique Lamb said LCR would give small businesses access to cheaper domestic debit payments schemes such as Eftpos and prevent banks from routing transactions to more expensive international providers.
“The RBA can no longer ignore the myriad voices from industry and government demanding changes that update the payments system for the modern digital world,” Ms Lamb said.
“Mandating least cost routing would provide enormous relief for small retailers at a time when many continue to battle lockdowns and other restrictions.
“Retailers across the country strongly urge the RBA to take on board the unequivocal stance made by the Treasurer and enact the necessary reforms to the debit payments system.”