Business groups and payments experts have panned the Reserve Bank’s policy stance on least cost routing, saying the final recommendations of the regulator’s retail payments review are inadequate.
The RBA’s Payments System Board released its policy conclusions report stemming from the review on Friday and has once again shied away from imposing an enforceable obligation on merchant acquiring banks to offer least cost routing services to retailers.
Least cost routing is a service that allows merchants to direct debit card transactions to the cheapest payments processing platform, which in Australia is the domestic debit scheme, Eftpos.
The major banks have been resisting calls to actively market the service because they generally collect higher fees by automatically routing such transactions to Visa and Mastercard.
The RBA has decided to take a light-touch approach of setting “an expectation” on banks to deliver the service for debit card payments covering in-store transactions and ecommerce.
However, in a potentially controversial move, it has specifically excluded debit payments conducted through mobile wallets from the policy expectation.
Australia’s small business and family enterprise ombudsman Bruce Billson said small business owners had every right to be frustrated with the RBA’s final report in relation to least cost routing.
“More decisive action is urgently needed to stop small businesses and family enterprises paying more than they need to for payment services,” Mr Billson said.
“For too long, small businesses have been slugged with unnecessarily high fees from credit card networks, when there is a cheaper option,” Mr Billson said.
“The Reserve Bank could have and should have done more after years of ‘urging banks to do the right thing’ which has resulted in an inadequate response andpoor access and uptake of least-cost routing for small merchants.”
Billson’s concerns were reinforced by Mangala Martinus, the managing director of merchant payments comparison service, Merchant Pricing Hub.
Martinus is concerned that the four major banks are not actively marketing the benefits of least cost routing to small and medium sized retailers.
"The RBA not mandating the implementation of least-cost routing for small businesses is a missed opportunity to support hundreds of thousands of retail and hospitality businesses reduce costs, at a time when many are struggling due to COVID restrictions,” he said.
“While competition is resulting in major banks introducing new pricing plans that incorporate LCR, these plans are mainly being promoted to new customers.
“Most major banks do not appear to be proactively implementing LCR for existing customers, so small business owners who don't have the time to call their bank, or shop around for a better deal, are not benefiting."
The exclusion of mobile wallets from the RBA’s least cost routing expectation is somewhat baffling given that LCR functionality is a built-in feature of most new generation mobile payments platforms now being rolled out to banks by leading technology providers such as Ingenico and Quest Payments.
The LCR capability for mobile wallets is being made available to the banks who will make the decisions on whether to switch it on for merchants or relegate it to dormancy.
While the RBA acknowledged that the inability of merchants