Payments sector comes out in favour of fees over interest

Further reading of the submissions to the Senate Economics Committee Inquiry into Credit Card Interest Rates has revealed a wide range of industry views.
 
There is, however, one subset of submissions from participants in the cards sector that share a consistent theme. These are the submissions from the players who cannot charge interest on cards, but feel obliged to protect their own patches.
 
The terms of reference for the inquiry included interchange fees, ATM fees and competition in the cards market. This was noted by the Australian Payments Clearing Association, which pointed out that interchange fees were currently being reviewed by the Reserve Bank of Australia, and the Financial Services Inquiry report had made further recommendations on interchange fees.
 
"In respect to the regulation of interchange fees, we remain of the view that the RBA is best placed to act as regulator," APCA said.
 
As for ATM fees, these had been reviewed a couple of times and, as well as funding the rise of independent ATM operators, the introduction of fees had seen consumer behaviour shift in response, APCA argued.
 
This theme was echoed, not surprisingly, by the Independent ATM Industry Group, comprising cash machine providers Banktech, Cashcard and DC Payments. Their submission was strongly skewed toward maintaining the status quo, and noted: "the last twelve months to May 2015 has been the lowest volume of transactions since the twelve month period to May 2003."
 
This is important as the groups' members operate more than 85 per cent of all independently-owned ATMs, or 55 per cent of all ATMs, in Australia. They have been hit hard by the introduction of tap and go cards, the rise of cash out facilities offered by most retailers and supermarkets, and problem gambler rules that have all impacted demand for cash.
 
In the face of these trends, the IAIG asserted that its members provide a valuable service to consumers by ensuring convenient access to cash and that this comes at a cost, best dealt with by keeping fees as they are.
 
MasterCard, while also conceding that it does not play any role in determining interest rates and does not receive revenue from interest rates, also took the opportunity to warn against further lowering of interchange fees below the current weighted average of 0.50 per cent, suggesting that overseas experience showed consumers bearing the brunt of any drop.
 
The payments giant's submission concluded that, "based on evidence in Australia and from several jurisdictions around the world including the United States, the United Kingdom and Spain, it is apparent that if Australians are to have access to affordable credit, adequate credit fraud prevention and protection and product choice, three things need to occur:
 
1. The Committee should specifically consider the impact of RBA regulation of interchange fees on interest rates;
2. The Reserve Bank of Australia should not further regulate interchange fees and exacerbate increased costs to consumers;
3. At a minimum, any payments regulation needs to be fairly applied to all participants in the payment system."