Banks will be expected to demonstrate they are investing in improved Eftpos services in order to continue with the revised wholesale fee arrangements that will apply from late this to year.Eftpos Payments Australia Limited published details yesterday of the proposed model for Eftpos interchange fees that will apply from October 2011.In most cases, the new fees eliminate the "reverse" or "negative" interchange fees that have been a hallmark of the system's fee arrangements since the foundation of Eftpos as a payments option at petrol stations in the mid-1980s.A three-tiered fee structure, devised by EPAL, will slash the overall income banks earn on the merchant-side of their business but lift the fees they earn on the card-issuing side.Taking into account the network fees already announced for Eftpos, the revised interchange fees will increase the fees per transaction by between six and 12 cents.The structure proposed by EPAL calls for an interchange fee of five cents (paid from acquirer to issuer) on transactions of A$15 or more. At present, the regulated fee is between four and five cents, and paid in the opposite direction. For transactions of less than $15 the proposed fee is zero, which represents an effective increase of between four and five cents.A zero fee is also proposed for some health payments and for all charity payments.Where a retailer provides "cash out", alongside a sale, EPAL proposes to maintain the "negative" fee flow, though reducing this to 15 cents from 20 cents.There are divergent estimates of how much fee-revenue banks might gain, on a net basis, from the reform of Eftpos interchange.Jost Stollman, managing director of specialist payments' processor Tyro Payments and a trenchant critic of the direction of EPAL's reforms, suggested the annual shift in revenue to issuing banks would be in excess of $200 million.Russell Zimmerman, from the Australian Retailers Association, said the annual gain to banks may be in the order of $115 million.Zimmerman said the ARA would appeal to banks to absorb the impact of the loss of fee revenue on the acquiring-side and not increase merchant-services fees to compensate.Bruce Mansfield, CEO of EPAL, said the net shift in fees would be less than $100 million and argued there were scenarios under which the net fee impact across the industry would be closer to zero.One thrust of the proposed fees is to make Eftpos more appealing for low value payments and to negate the policy of many merchants with Eftpos facilities of requiring a minimum sale (often of at least $10).EPAL points to the New Zealand market, where half of all sales of less than NZ$20 are paid using Eftpos. In Australia, the proportion of Eftpos sales for small purchases is around 20 per cent.The proposed multilateral fee arrangements will only apply if the existing parties to the bilateral Eftpos switching arrangements agree.In practice, this will mean all banks will adopt the new fee structure, but existing fee flows - including "negative" interchange fees paid to Coles and Woolworths - will remain as they are