Tired of waiting for the big banks to make good on their promise to make tap-and-go payments cheaper for businesses to accept, four industry groups have launched a public campaign to raise awareness of the benefits of least cost routing (LCR) and pressure the Reserve Bank of Australia (RBA) to force the banks to implement it.
The Fairer Merchant Fees Alliance, which includes the Australian Retailers Association (ARA), the Council of Small Business Australia (COSBOA), Master Grocers Australia (MGA) and the Australian Convenience and Petroleum Marketers Association (ACAPMA), released a statement on Tuesday calling out the big banks for dragging their feet on LCR.
LCR is a way for businesses to choose how they accept debit card payments at the point of sale – via a card scheme like Visa or Mastercard, or through Eftpos’s cheaper cheque/savings option – and it could lead to a significant reduction in fees.
It is estimated that LCR would save Australian businesses more than $500 million a year in fees, but despite the RBA telling banks to implement LCR or face regulation more than a year ago, little progress has been made.
Some banks have implemented a weaker form of LCR, in which they allow businesses to choose to process tap-and-go debit card transactions either through the Eftpos network or Visa and Mastercard networks, but they still don’t allow businesses to automatically choose the cheapest method for each transaction at the point of sale.
“[The] alliance started about six months ago after we became aware that the major banks’ promise to implement LCR largely involved a ‘dumb’ form of LCR that didn’t address the issues we raised,” Peter Strong, COSBOA’s CEO, told Inside Retail.
Strong said he has been speaking with the RBA and the Australian Banking Association about LCR for over two years.
“We had held back [from going public] on the basis of [the] RBA and industry [saying] that most major banks were to have LCR in place by mid-2019,” he said.
He and the other industry groups are tired of waiting. The public launch of the Fairer Merchant Fees Alliance has been timed to coincide with the lead-up to the RBA’s Review of Retail Payments Regulation happening next month.
