Small business council chairman Mark McKenzie
The Reserve Bank is facing a backlash from business groups over its plan to allow most Australian banks to issue single network debit cards tied to the Visa and Mastercard payments platforms.
A coalition of ten business peak bodies yesterday wrote an open letter to Treasurer Josh Frydenberg and other members of the government calling on them to support their campaign against an RBA proposal that would allow banks to issue debit cards without Eftpos functionality.
Small business council chairman Mark McKenzie said business owners were worried that the growth of single network cards would constrain their ability to route contactless transactions to the cheapest processing network, which was usually Eftpos.
McKenzie and senior officers of peak bodies from the retail, pharmacy, petroleum, restaurant, lottery and convenience store industries, are demanding that the RBA introduce a new default requirement for all debit card transactions to be routed to the cheapest processing network.
Under current arrangements retailers can only access cheaper processing of contactless debit transactions by requesting the service from their bank.
“The introduction of least cost routing (LCR) in Australia has been tortuous, with a raft of obstacles slowing its rollout and uptake,” the business groups tell Frydenberg in the letter.
“Now new barriers are being erected that put at risk the progress to date and would make it near impossible to access LCR in the growing mobile wallets and online channels.”
McKenzie said the RBA should not allow banks to narrow the choices available to retailers wanting to control the costs they incur for accepting card payments.
“Retailers need to be able to make informed choices, but if one of the payments networks is removed from debit cards issued by banks then they simply can’t choose,” he said.
“For merchants, the only way to keep competitive tension in the payments market is by requiring banks to issue dual network cards.
“The RBA needs to step in now because the risks for small business are too great.”
Research conducted by COSBOA indicates that independent retailers stand to garner material savings on acceptance costs if banks provide them a means to access least cost routing.
McKenzie said high volume businesses such as stand-alone supermarkets were garnering savings of up to A$26,000 a year after adopting LCR, while small service stations were cutting acceptance costs by almost $13,000.
Jos de Bruin, CEO of Master Grocers Australia (MGA), said the prospect of banks recalibrating their debit cards to operate only on one network would erode competition and bloat the costs borne by retailers and cardholders.
“We are very concerned about the risk of the Eftpos service being removed from debit cards,” he said.
“Eftpos is the more affordable system for small businesses to use.”
The MGA was a signatory to the letter handed yesterday to senior government ministers and members of the Labor Opposition.
Other signatories included the Australian Retailers Association, the Franchise Council of Australia, the Australian Lotteries and Newsagents Association, the Pharmacy Guild and the National Retail Association.
The public release of the letter followed a frenetic day of lobbying in Canberra where representatives of the business coalition met with small business minister, Stuart Robert and the chair of the influential House of Representatives economics committee, Tim Wilson.
The delegation that met with Robert also included representation from the Australian Chamber of Commerce and Industry.