PSB counts savings not costs

The average merchant service fee on Eftpos or debit card transactions is around 10 cents a transaction higher, or around eight cents, and up from a value of minus two cents a year ago according to estimates published in the annual report of Payments System Board yesterday.

The PSB previously estimated the average merchant fee on Eftpos payments at zero, or negative, due to the practice of banks paying large merchants a small fee for each transaction introduced by the merchant, a practice dating back to the early days of Eftpos around 20 years ago.

The PSB (which is part of the Reserve Bank of Australia) chased that practice into history as a result of imposing a cap (of five cents) and a floor (of four cents) on Eftpos interchange, down from a prior level of around 20 cents. (Eftpos interchange is paid by the card holder's bank to the merchant's bank, the reverse of the flow that applies to credit card interchange). Regulated levels of Eftpos interchange came into affect last year.

The annual report of the PSB does not includes an estimate of the costs to merchants of higher fees on Eftpos. The PSB did estimate the savings to merchants from the reduction in credit card interchange, and thus merchant fees, at $970 million over the last financial year, and at $2.5 billion since the PSB's regulation of payments systems came into force in 2003.

The report also repeats estimates first published by East & Partners that 17 per cent of large merchants now routinely impose a surcharge on credit card payments, up from seven per cent two years ago.