Surcharging scourge overstated, say merchants
More research is needed into the incidence of credit card surcharging before any regulatory steps are taken to curtail merchants' present freedom to levy their customers, or so the retail industry lobby argues in a submission to the Reserve Bank of Australia.
In June, the Payments System Board said it might allow credit card schemes to introduce rules that oblige merchants to limit the level of surcharges applied to payments made with credit cards.
Surcharging of credit card payments has been possible in Australia since 2003, following regulations that forced MasterCard and Visa, and the banks, to drop their ban on surcharging. American Express and Diners club also co-operated in dropping their own bans.
A handful of industry submissions on the topic were published by the RBA yesterday.
The Australian Merchant Payment Forum produced the only submission to engage with the data, such as it is, on the extent of credit card surcharging. In particular, the AMPF raised numerous queries over the merit of the occasional research by East & Partners on merchant surcharging.
The East research was the major source cited by the PSB in June in connection with its policy review.
The AMPF wrote that "there are significant anomalies in the [East] research findings and that more accurate research and a better understanding of the current environment is required before any decisions can be made regarding surcharging."
The merchant lobby pointed out that the RBA's own recent study of consumer payments' use (undertaken by Roy Morgan Research) shows that the incidence of surcharging is around five per cent of credit card transactions and that this is unchanged from three years earlier.
The AMPF also questions the merit of taking note of the actual number of merchants that surcharge, based on surveys, as opposed to estimates of the number of card payments that incur a surcharge.
The merchant forum wrote that "five major AMPF members account for 29 per cent of all general purpose payment card transactions in the Australian market. Given that none of these merchants surcharge, their exclusion from the research has the potential to distort the results."
According to the AMPF, "there appears to be no evidence of widespread excessive surcharging. The largest surcharges seem to occur with card-not-present transactions, such as online purchases."
The AMPF argues that the relevant criteria for assessing alleged profiteering by some merchants is not the merchant service fee but the total cost of acceptance of card payments by merchants.
Some of these merchants, which include airlines, hotels and online retailers, "frequently have far higher costs of card acceptance, including higher merchant service fees and higher levels of charge-backs, and any surcharges they impose should be considered in light of these higher costs."
It notes that "many online merchants also pay fees to a payments 'gateway' in addition to paying a merchant service fee to their bank" and pay higher interchange on payments from international customers.
"The AMPF does not support excessive surcharging but sees no credible evidence of any need for further controls."