The powerful Australian Banking Association led by Anna Bligh has promised its retail sector counterpart it will take a look at the battle over Eftpos and bank card merchant fees that costs the nation’s shop owners more than $500m.

Ms Bligh and Commonwealth Bank chief executive Matt Comyn, who is chair of the ABA, called in Russell Zimmerman from the Australian Retailers Association for talks on Monday. Payments and the contentious issue of “least-track routing”, which has drawn the attention of the Reserve Bank, regulators and politicians were discussed at the talks.

At stake is the rich flow of fees that slosh around the banking system triggered by shoppers using their Eftpos, debit or credit cards at retailers and other service providers and the charges that merchants have to swallow depending on what card or account option the customer uses at point of sale.

The ARA has estimated its members collectively pay more than $500m in annual merchant fees on bank card transactions, while the RBA has highlighted the payments system as an added cost to the economy.

Least-track routing is an initiative aimed at promoting competition in the debit card market, and helping reduce payment costs.

In the payments system when a customer makes a contactless or “tap-and-go”, payment with their dual-network debit card, the merchant may choose to send the transaction via the debit network that costs them the least.

If the merchant chooses not to route the charge the transaction will be sent via the default network which is programmed on the card, usually the Debit Mastercard or Visa Debit network.

Typically the merchant fees on Mastercard and Visa can be up to four times higher than that for the Eftpos network.

The ARA would like industry-wide acceptance of least-track routing and many retailers have previously viewed some of the banks as dragging their feet on the debate, possibly driven by the fact financial institutions can earn higher fees on certain transactions and hence are not keen to always have the lowest cost payments route chosen at the point of sale.

Previously a coalition of retail sector groups including the ARA, the Council of Small Businesses Australia, the National Retail Association, Master Grocers Australia and the Australian Conven­ience and Petroleum Marketers Association have claimed the banks are not transparent enough about recent routing changes. The group has called on banks to adopt least-track routing for e-commerce and mobile payments.

The ABA now looks to have rekindled talks with the ARA, inviting Mr Zimmerman for a meeting on Monday, where he met Ms Bligh and Mr Comyn.

It was viewed by all as a productive meeting.

The ARA was promised the ABA would look at the problem on behalf of its members and come back to the retailers in the next five to six weeks with some ideas.

The RBA openly supports the issuance of dual-network cards to consumers and the provision of least-cost routing functionality to merchants.

Adding further regulatory weight to the issue, several recent government reports have called for banks and payment providers to provide merchants with least-cost routing. They include the House of Representatives standing committee on economics’ third report on the review of the four major banks, the Productivity Commission draft report on competition in the Australian financial system, and the Black Economy Task Force final report.

But some payments players have hit back, cautioning regulators about introducing rules that would mandate how retailers from pubs and clubs to suburban butcher shops and department stores process tap and go payments.

The ARA and ABA were unavailable for comment.

Extracted from The Australian

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