Banks told to pick up pace of least-cost routing rollout
With retailers paying around $500 million in fees annually to accept contactless card payments, the rollout of least-cost routing by the major banks that issue payment terminals has been highly anticipated in the sector.
The rollout would allow retailers to choose how they accept payments at the point of sale – via a card scheme like Visa or Mastercard, or through Eftpos’s cheaper cheque/savings option – and could lead to a significant reduction in fees.
But some banks, including the major four banks, have failed to follow through on commitments made earlier this year, according to the Governor of the Reserve Bank of Australia (RBA), Philip Lowe, who gave a speech at the Australian Payment Summit in Sydney on Monday.
“The longstanding view of the Payments System Board has been that merchants should at least have the choice of sending the debit payment through the lower cost system, whether that be Eftpos or the international scheme,” Lowe said.
“For merchants to be able to do this though, acquirers need to offer terminals and technical systems enabled to allow least-cost routing. Some acquirers have already completed the necessary work and are attracting new merchants. Others, including the major banks, made commitments earlier in the year regarding the timetable for this work to be completed.”
Lowe noted that the RBA chose not to regulate the rollout of least-cost routing based on the banks’ commitments and warned that a failure to follow through could result in regulation. He was critical of the “technical problems” that some banks cited as delaying their rollout.
“It is important that the banks get back on track here. A failure to deliver on commitments or to provide the payment services that the community needs will inevitably lead to calls for further regulation,” he said.
Rogut said that some retailers have seen these fees increase dramatically, and that they represent one of the more significant unnecessary costs to retailers.
“Consumers increasingly expect to pay for their items by tap-and-go, and so by delaying the introduction of new routing services for contactless payments, it is costing retailers more,” he said in a statement.
“In an environment in which the reputation of the major banks is at an unprecedented low, it is both surprising and disappointing that they continue to collect higher fees for processing contactless transactions while small businesses and consumers pay more.”