We were pleased to provide an independent economic review of the Reserve Bank of Australia’s (RBA) Review of Merchant Payment Costs and Surcharging Consultation Paper. Our report informed the Australian Banking Association (ABA)'s recent submission in response to the RBA’s Consultation Paper.
The RBA’s proposed changes to regulations on the operation of card payment schemes include removing surcharging on debit, prepaid and credit cards and lowering caps on interchange fees for credit and debit card transactions.
We analysed the conclusions drawn by the RBA relating to surcharges and proposed cuts to interchange fees.
Our key finding was that the RBA’s proposed approach in the Consultation Paper is likely to have significant negative effects on the payments system and, ultimately, on consumers.
We recommended that:
- In line with the RBA’s findings surcharging should be removed for both debit and credit transactions as current surcharging is not sending clear price signals around the cheapest payment method to consumers;
- Interchange fee caps and benchmarks should be retained at their current level for both debit and credit transactions; and
- The RBA should wait until it has regulatory powers for all payment systems before making any more interventions in the market. They should also assess the observed effect of removing the surcharge ban before making any further changes.
