Surcharge cap a mirage

The final Murray report may set up two new wrangles on tired old debates in the payment systems.

On one front the final report of the Financial System Inquiry proposed to revisit interchange fee regulation "by clarifying thresholds for when they apply, broadening the range of fees and payments they apply to, and lowering interchange fees."

On this topic David Murray's panel have in mind the more assertive stance adopted, for example, in Europe, where regulators are "implementing lower interchange fee caps than Australia and applying caps more functionally."

The inquiry said it "considered banning interchange fees altogether" but said this would have high transitional costs.

"Instead, the inquiry recommends that the Payments System Board consider reducing interchange fees in the short term, and then consider further lowering fees in the longer term, depending on market conditions," the report said.

On a second front, the report outlines a scheme to patrol excessive surcharging on credit card and scheme debit payments in a manner that "ensures customers using lower-cost payment methods cannot be over-surcharged by allowing more prescriptive limits on surcharging."

Of present arrangements, it said: "reasonable cost surcharge rules are difficult for system providers to enforce, potentially complex for merchants to comply with and cause frustration for consumers."

The inquiry's alternative is to foster limits set "to approximate payment acceptance costs", while "allowing low-cost system providers to ban surcharges to encourage consumers to use low-cost payment methods."

Amusingly, the only "leak" from the FSI report, in News Australia tabloids on Saturday, turned out to be false.

The newspapers had reported Murray would back a cap on card surcharges of 12 cents, or 0.5 per cent, of the purchase price.