Hidden $1.9bn cost in card network fees

Card purchases crossed Australia attracted astir $2bn successful work fees past fiscal year, prompting calls for greater transparency by a apical Reserve Bank official.

The charges, levied by companies including MasterCard, Visa and Amex, are known arsenic “scheme fees” and are paid erstwhile a business’s slope accepts paper payments arsenic good arsenic the outgo incurred by the paper supplier to work its customers.

Much of the outgo load falls connected banks and consequently their concern clients, arsenic paper providers tin much readily vie for little strategy fees.

In the 12 months to June 2023, nett strategy fees worthy astir $1.9bn were paid by banks and paper providers to paper networks. This outgo was past passed done to businesses and yet borne by customers done higher prices for goods and services.

That fig was 43 per cent higher comparative to the 2021-22 fiscal twelvemonth and importantly outpaced a 16 per cent summation successful paper transactions.

Scheme fees usually magnitude to a proportionality of the full transaction but tin beryllium levied connected the ground of the fig of outlets a slope services, irrespective of the measurement of transactions processed astatine each location.

The soaring outgo of strategy fees, which look nary regularisation restricting their growth, has prompted RBA politician Michele Bullock to endanger a regulatory crackdown that could guarantee transactions default to the slightest costly paper network, creating greater incentives for networks to little their strategy fees.

Speaking connected Tuesday, the RBA’s caput of payments argumentation Ellis Connolly said overmuch of the uptick successful strategy fees was owed to planetary paper transactions, which bounced backmost up aft Covid pandemic exigency measures ended.

But portion strategy fees had risen sharply, successful crook heaping further outgo connected businesses and their customers, the charges remained “complex and opaque”, frankincense demanding heightened transparency, Mr Connolly added.

“Beneath these aggregates, determination is simply a batch of saltation successful strategy fees betwixt the antithetic paper networks,” helium told the Merchant Risk Council Conference successful Melbourne.

“So greater transparency of the strategy fees being charged by each paper web could assistance merchants amended recognize these fees and marque amended informed decisions, specified arsenic to which web they way debit transactions.”

However, contempt the RBA’s calls for greater transparency, Mr Connolly said planetary paper networks had refused to supply the cardinal slope with this detail.

“We are incapable to people information connected the fees charged by each web due to the fact that the

international paper networks did not assistance support erstwhile it was requested,” helium said.

“We volition rise the lawsuit for much transparency connected strategy fees arsenic an contented for consultation successful our upcoming review.”