The Australian Retailers Association (ARA) has called on the Federal Government’s Financial Systems Inquiry to undertake changes to ensure all current and emerging payment schemes fall under the same guidance as the two major card schemes.
ARA executive director and chair of Australian Merchant Payments Forum (AMPF) Russell Zimmerman said the two party schemes (where banks issue co-branded cards allowing systems like Dinners and AMEX to avoid rules) are significantly hitting retailers bottom lines.
“We are seeking a mechanism that will capture these schemes along with new and emerging payments systems,” Zimmerman said.
“Due to the competitive nature of retail and the increased volume of co-branded cards, merchants are unable to refuse acceptance of these cards. For the independent SME retailer as well as the major chains, any impediment or barrier to the consumer by trying to steer the consumer away from using these co-branded cards will result in the consumer shopping elsewhere with a merchant that accepts their preferred method of payment.
“The ARA firmly believes that there is currently an unequal playing field. New entrants to the payment system are able to decide their own pricing model and choose if they wish to allow surcharging by the merchant, however, both of the schemes Visa and MasterCard are regulated to ensure that merchants rightfully are not charged more than a reasonable Merchant Service Fee (MSF).
“It is therefore only right that all participants in the payments system must be treated fairly and equally. Regulations need to be broadened to include both three party schemes (AMEX and Diners) and the existing regulated four party schemes (Visa and MasterCard) as well as new and developing entrants into the payment space.
“The ARA urges the Financial Systems Inquiry to review the cost structure of the payments industry. We believe that the effect of co-branded cards, the routing of scheme debit cards and the current and future fraud cost on the retail sector has and is continuing to have a large impact on costs that retailers are forced to accept,” Zimmerman said.
Other key points raised in the ARA submission include:
- Rule changes are required in relation to co-branded or companion cards issued by financial institutions;
- All schemes need to be brought under regulation, not just the four party schemes that are currently regulated;
- Merchants should have the choice of routing for all payment transactions including, but not limited to, AMEX, Scheme Debit and contactless transactions;
- As internet transactions increase (currently at six per cent of total retail – expected to grow to 12% of retail sales by 2020) and technology changes rapidly from cards to mobile devices to new POS equipment, merchants will need to invest heavily in new technology. Therefore, any costs to merchants need to be controlled;
- As bricks and mortar retailers move to PIN on credit (August 2014 onward) there will be necessity for increased security in the online area as fraud will shift from bricks and mortar retailing to the online retail space;
- Retail trading conditions are currently improving but unfortunately these increases are not being seen across all sectors of the retail industry. Retailers are still struggling from the post GFC and are unable to accept costs of innovation and increases in MSF that they have been experiencing from new entrants into the payment space.