Access reform commitment allows zero EFTPOS wholesale fee proposal to go ahead
With access reform to the Electronic Funds Transfer at the Point of Sale network likely to go ahead, the Australian Competition and Consumer Commission has authorised* today a proposal by banks and others** to fix the wholesale fees for EFTPOS transactions at zero.
"In August 2003, the ACCC indicated it would refuse to authorise the EFTPOS fee proposal as, by itself, it would be unlikely to be in the public interest", ACCC Chairman, Mr Graeme Samuel, said today. "The ACCC believed the level of competition between EFTPOS providers was insufficient to ensure the sustained pass-through of cost savings to cardholders and was unlikely to result in competitive merchant service fees.
"The ACCC was particularly concerned that, in such an environment, the revised merchant service fees may disadvantage small businesses.
"The ACCC believes it now has a commitment that gives it certainty that the access reform will go ahead", Mr Samuel said. "The Australian Payments Clearing Association has provided assurances that it is developing an access regime as a priority. In addition a recent Reserve Bank of Australia submission states that should industry efforts to voluntarily reform access falter the Bank 'would seriously consider, in the interests of promoting efficiency and competition in the Australian payments system, designating the EFTPOS system' ".
In its draft decision the ACCC indicated that a way forward for the interchange fee proposal was a commitment to suitable access reform.
"Following the Reserve Bank's submission, the ACCC is satisfied that the EFTPOS fee reform is likely to result in a range of benefits to consumers, including lower cardholder transaction fees and improvements in banking services.
"This reform is also likely to promote EFTPOS as a cheaper payment alternative. It will address some inefficiencies in the Australian payments system, leading to savings for the Australian community as a whole.
"The reform is likely to mean increased fees charged to merchants for accepting EFTPOS transactions. But the ACCC is satisfied that competition will be improved in a timely manner through allowing access for new entrants to the EFTPOS network. This increased competition will constrain merchant service fee increases to small businesses".
EFTPOS reform is now in line with the Reserve Bank's credit card reforms, which tackled wholesale fees and access reform. It will mean that retailers and the Australian public will benefit from significantly enhanced competition between providers of payment instruments and payment services.
The ACCC's decision will be available from its website and will take effect from 3 January 2004 until 31 December 2006.
* The Trade Practices Act 1974 prohibits certain forms of anti-competitive agreements, including agreements between competitors that limit their ability to deal with whom they choose or on the terms they choose (including price). Authorisation provides immunity from court action under the Act arising from such agreements but can only be granted where the ACCC is satisfied that the public benefit flowing from the conduct outweighs any public detriment.
** The applicants for authorisation are: Australia and New Zealand Banking Group, Australian Settlements Ltd, Bank of Queensland, Bank of Western Australia Ltd, Bendigo Bank, Cashcard Australia Ltd, Commonwealth Bank of Australia, Credit Union Services Corporation (Australia) Ltd, National Australia Bank, St. George Bank Ltd, Suncorp Metway Limited, and Westpac Banking Corporation
EFTPOS (Electronic Funds Transfer at Point of Sale) provides consumers with an electronic means of payment for goods and services at the point of sale. In Australia each month approximately 63.8 million EFTPOS transactions are processed at a value of $4 billion. This compares with approximately 80.6 million credit card transactions per month at a value of $9 billion.
Fees payable in respect of EFTPOS transactions
EFTPOS interchange fees are fees that the card holder's bank pays the retailer's bank for each debit card transaction accepted by the retailer. Currently these fees are set by bilateral negotiations between card issuers and merchant acquirers and on an aggregate basis amount to approximately $150 million per annum.
The Joint Study
The significance of both debit and credit cards in Australia's retail payments system has meant that they have both come under increasing scrutiny from network participants and industry regulators who have an interest in ensuring the overall efficiency of Australia's payments system. For example, in October 2000 the Reserve Bank of Australia and the ACCC released Debit and Credit Card Schemes in Australia: A Study of Interchange Fees and Access (the Joint Study). The Joint Study broadly concluded that in the Australian credit and debit card networks competition is not working as it should.
In April 2001 the Reserve Bank began examining the credit card network in more detail and 'designated' the four party credit card schemes, making them subject to its regulation. As part of the designation process the Reserve Bank has recently introduced a package of reforms that establish:
a standard for the setting of interchange fees;
a standard for merchant pricing of credit card purchases; and
a regime for access to the four party credit card schemes.
Following on from the credit card reform process members of the EFTPOS industry have sought to respond to some of the debit card network deficiencies that were identified by the Joint Study (for example applications for authorisation A30224 and A30225 in relation to the collective setting of EFTPOS wholesale fees).
