Speaking on a Morgan Stanley webcast, assistant governor Michele Bullock cautioned that payment costs are rising for small merchants, as the coronavirus crisis speeds up the demise of cash payments across the country.
Ms Bullock opined that as electronic payments become more common, costs to merchants of electronic payments must be kept as “low as possible”.
Commenting on the availability of least-cost routing in Australia, the assistant governor said that while it is there, it’s not being widely promoted by the major banks.
“With many customers switching to contactless in response to COVID-19, some merchants are finding their payment costs rise as debit card payments are automatically routed through the international schemes,” Ms Bullock said.
“It is therefore important that merchants be given the option of least-cost routing.”
She noted that while the RBA has not mandated that acquirers “explicitly offer least-cost routing to all their merchants”, it remains an option that will be considered in the review.
“In the meantime, we are talking with merchants to understand their experience with payment costs through this period,” she said.
“We will also be considering how transparency of the cost of the payment plans offered to merchants could be improved.”
She also noted that if market forces are not generating competition to lower the cost of debit card payments, the RBA may need to consider lowering the benchmarks that serve as a cap on average interchange fees.
“If banks or other stakeholders are acting in ways that prevent downward pressure on merchant fees, we may need to consider regulatory options for keeping the cost of electronic payments low,” Ms Bullock said.
“The evidence is that the growing availability of least-cost routing has increased competition among card schemes through reductions in interchange fees, and this has resulted in a lower cost of acceptance for card payments for some merchants.”
Last month, the small business ombudsman joined retailers in pressuring the banks to adopt least-cost routing and send tap-and-go payments via the cheapest payment pathway to limit the costs incurred by small merchants.
“Small businesses are being disproportionally hit by fees, with larger retailers able to bypass full fees by using payment systems directly or by having the market power to negotiate least-cost routing with their banks,” said Australian Small Business and Family Enterprise Ombudsman Kate Carnell.
It’s estimated about $30 million in extra fees were paid by merchants during March, due to banks directing debit card contactless payments to global companies such as Visa and Mastercard.