The Reserve Bank and Treasury are looking into the possibility of extending the Consumer Data Right to merchant acquiring services provided to small businesses, making it easier for merchants to access their transaction data and get quotes from alternative payment providers.
This move, outlined in the latest Reserve Bank Bulletin, is part of the RBA’s commitment to take steps to improve competition in the acquiring market for smaller merchants.
The RBA also said it is taking further action to support the take-up of least cost routing to allow merchants to choose the lowest cost payment network. And it expects LCR functionality to be made available for mobile wallet transactions.
The RBA said that while merchants’ average cost of accepting card payments has declined over that past five years, the average cost of accepting debit transactions has risen. This is because of the increase in contactless (including mobile) and online card payments, most of which are processed using the more expensive Visa and Mastercard networks.
“There has been less competitive pressure on the interchange and scheme fees for mobile and online transactions. This is because least cost routing is currently not available for mobile wallet transactions and because eftpos did not have the ability to process online transactions until recently,” the RBA said.
The RBA said that overall, the shift in consumer spending away from credit cards to debit cards has contributed to a reduction in average merchant payment fees, but consumers are making more payments with cards and this means total merchant payment costs are rising.
Debit cards accounted for 58 per cent of the total value of card payments in 2021 – up from 42 per cent a decade earlier. Debit cards tend to be less expensive for merchants to accept.
The RBA lowered the benchmark it sets for average debit card interchange fees in 2017, which contributed to a decline in fees for Mastercard and Visa debit.
The average merchant fee for debit cards has moved within a narrow range, with downward pressure from interchange fee reforms and competitive pressure from least cost routing. Merchants are charged materially less for debt transactions processed via the eftpos network.
Payments made through the eftpos network cost merchants 30 basis points of transaction value on average. Average merchant fees for payment made through Visa and Mastercard are 50 bps on average for debit and 90 bps for credit.
Costs of accepting American Express and Diners Club cards has come down over the past decade but remain they remain the most expensive networks, with average merchant fees of 1.3 per cent of Amex and 1.7 per cent for Diners.
The RBA said that, as of mid-2022, LCR is available to 85 per cent of merchants, with these merchants accounting for 88 per cent of the total value of debit transactions.
But LCR has been enabled for only 50 per cent of merchants, with these merchants accounting for just 33 per cent of the total value of transactions.
The RBA said: “Having LCR technically available does not necessarily mean that it is accessible in practice. Merchant