The Reserve Bank of Australia on Wednesday hardened its stance on banks opening their merchant terminals to new competitors in the contactless payment market, warning that it will consider wide-ranging regulatory action if the industry does not comply with its request by early next year.In a blunt presentation to the Australian Payment Summit in Sydney, the RBA's head of payments policy, Tony Richards, said the Payments System Board would consider a range of measures to ensure merchants are given access to least cost routing on Tap 'n' Go transactions."The [Reserve] Bank expects that by early in 2018 there will be concrete indications that a critical mass of acquirers are moving to provide least-cost routing and that the international schemes are not attempting to prevent this," he told the conference."However, if this expectation is not met, I expect that the Payments System Board will consider consulting on a regulatory solution that deals with all the relevant considerations."Mr Richards said the regulatory measures would be determined by the PSB but could include "a requirement that acquirers must provide merchants with least-cost routing functionality for contactless dual-network debit card transactions".However, he also indicated that reform of the contactless debit market might go beyond only exposing the Visa and Mastercard platforms to competition from potential low-cost rivals such as eftpos Australia.The PSB might also force the banks to overhaul the way they price card-based payment services to merchants by imposing new disclosure requirements on acquirers.Richards indicated that the international card schemes might also be in the line of fire.The PSB is concerned that international card schemes might attempt to recoup lost revenue from least-cost routing reform on debit cards by potentially increasing fees on credit card transactions.To avert such a scenario, Richards indicated the PSB might consider forcing the card schemes to publish explicit criteria for setting preferred or strategic interchange fees.It might also designate the card schemes in such a manner that they are prevented from linking the pricing of credit card services to contactless debit transactions.There is evidence in the Australian market that some banks might have already linked the pricing of credit card transactions to debit payments.Monthly invoices issued to merchants by Commonwealth Bank in October show that some retailers were shifted on to new pricing models known as "Interchange Plus" plans.Merchants contacted by Banking Day said the bank did not give them notice of the pricing changes.Under current arrangements negotiated between the major banks and international card schemes, all contactless debit transactions are automatically processed through high-cost networks owned by Visa and Mastercard.The RBA's reform agenda aims to give more power to merchants to decide whether contactless transactions are processed by the international card schemes or via new entrants such as eftpos Australia.Research published by the Reserve Bank indicates that eftpos could lower the cost of processing contactless debit payments by more than 50 per cent.Payments experts believe eftpos' entry could deliver cost savings running into the hundreds of millions for businesses.Specialist business bank Tyro is likely to be the