Australia’s peak organisation for small business is concerned about an issue that could have a negative effect on retailers and other merchants.
Small businesses are worried proposed changes to Australia’s debit cards payments system will deny them access to eftpos, in doing so slugging them with even higher transaction costs than they’re already paying.
The Reserve Bank of Australia has been looking into changing retail payments regulation, consulting on its proposal that only the “big four” banks will need to keep issuing dual network debit cards (DNDC), which work on both the domestic eftpos scheme and either one of the international networks, Visa or MasterCard.
Having the choice – theoretically – allows payments to be processed through the lowest cost network, known as least cost routing (LCR).
But a growing number of small and medium-sized banks are choosing to offer single-network debit cards (SNDC).
In its consultation paper released in May, the RBA observed this trend was among “a number of emerging threats to the viability of LCR”, saying policy action to limit and slow the shift to SNDC was “therefore desirable”.
However, the central bank said its board was “not convinced that the benefits of extending any requirement to issue DNDCs beyond the major banks would outweigh the additional costs imposed on those smaller issuers, though it invites stakeholder views on an alternative option of mandating broader issuance of DNDCs”.
Council of Small Business Organisations Australia interim chief executive Alexi Boyd said it was a worrying issue for merchants given the increasingly cashless society and rising use of digital wallets such as Apple Pay, which defaulted to the more expensive international networks.
The organisation has called for DNDC to be made mandatory for all banks and for LCR to be the default for all debit transactions, whether consumers tap their card, wave their device or pay online.
“Least cost routing has been supposedly offered to small businesses for the last few years, and during that time, less than 10 per cent of small businesses actually access it on debit card transactions,” Ms Boyd told NCA NewsWire.
She said that’s because the myriad bank charges merchant clients were slugged with were highly complicated and tricky to understand, so few were armed with the information they needed to make a competitive decision on where to bank, let alone work out how to pass on surcharges to their customers.
“It’s very difficult to on-charge those costs,” Ms Boyd said.
“Technically, there’s only certain types of transaction fees that they are allowed to surcharge on to the consumer.
“It is so difficult to unpack and so onerous.
“We don’t have a great deal of faith in the banks … they are making money from transaction fees and they are going to make more money if the higher cost (debit transaction fees) is taken up by the small business owner than the lowest cost for essentially the same service.”
The RBA is expected to release its final conclusions in coming months.
Originally published as Small businesses fear potential changes to debit cards system could deny them lower cost eftpos option
For all the latest business News Click Here
