The prospects for an informed public debate on the future of digital payments look dim, if the hearings of a parliamentary committee on Monday can be taken as a guide.
Members of the corporations and financial services committee inquiring into digital payments will have to do a lot more research on how the established card-based payments system operates before they stand any chance of grappling with how mobile wallets are likely to impact Australian consumers and merchants.
Government and Labor members of the committee yesterday struggled to grasp many of the big debit payments issues canvassed in the Reserve Bank’s recently released consultation paper.
It seems that many members of the committee chaired by Queensland government MP Andrew Wallace had not bothered to even read the executive summary of the RBA paper, which would have set them straight on the fundamental arrangements that drive the payments system in Australia.
Instead of doing that primary research, the politicians fired a string of absurd questions at Eftpos CEO Stephen Benton on a range of fantastic matters including whether least cost routing applied to credit card transactions.
Benton politely gave answers to such questions.
“In credit cards there is no least cost routing - that only applies to debit cards,” he told the committee.
But such explanations weren’t clear enough for Wallace who persisted in peppering the Eftpos chief with questions that appeared to make little or no sense.
Benton was then asked to clarify the difference between dual network debit cards and their single network variants.
It was a painful exercise which demonstrated the challenges facing payments industry participants such as Eftpos trying to advance arguments for reform to lawmakers.
The morning hearings of the committee were almost a waste of time, with Wallace and other members failing to put any questions to Benton that were relevant to the purpose of the inquiry – mobile wallets.
In a tabled statement Benton noted that mobile payments technology has not been updated in Australia to support least cost routing (LCR) and that higher fees were often applied to transactions made on mobile phones due to an absence of competition.
“Currently, when debit cards are provisioned to mobile wallets, they default to international schemes – often meaning higher costs for merchants,” he told the committee.
“In other countries, this problem has been solved and LCR is available in mobile wallets using one of two models, either of which could be implemented here to ensure both schemes are available for the merchant to choose.”
But the significance of these observations seems to have been lost on Wallace and other committee members because they patently don’t understand what least cost routing is and have spent little time investigating why the headline topic of their inquiry – mobile wallets – are being designed to upend competition.
One can only hope that the committee does some research on the anti-competitive effects of single network cards before it makes any recommendations to government about mobile payments.
If the committee is unable to do that - its stands little chance of identifying where the public interest might