Visa calls on RBA Review to level the playing field and support innovation in payments
In its submission, Visa also calls for action on surcharging to protect consumers from unnecessary costs at the checkout
Sydney - Visa has today called on the Reserve Bank of Australia Review into card payments regulation (“RBA Review”) to bring competitive neutrality to the payments sector and to ensure the best conditions exist to enable payments to keep pace with the digital revolution.
In its submission to the RBA Review, Visa has stressed the need for balanced and equally applied regulation of electronic payments, and an approach that enables innovation in an ever-changing sector.
Stephen Karpin, Group Country Manager for Visa in Australia, New Zealand and South Pacific said, “The digital revolution has created an ability for companies to participate in commerce by creating new experiences through mobile, tablets, PCs and future connected devices. Last year alone there were over 1,500 payment startups. Given this rate of change, it is critical we see regulation updated to give the payment system ample room to adapt to future developments.
“As the Financial System Inquiry (FSI) process highlighted, there is also a lack of competitive neutrality among existing players in the payments industry and this needs to be addressed as a priority focus,” he said.
Visa is calling on the RBA Review to:
1. Level the playing field – currently Visa and MasterCard are regulated under the Payment Systems (Regulation) Act 1998, but this has not extended to other networks such as American Express, Diners Card, UnionPay and PayPal. This competitive disparity has cost consumers and merchants around A$770 million since the regulations were first established.
2. Maintain a weighted-cap on interchange – Visa's observation both in Australia and overseas is that lowering interchange fees is unlikely to deliver significant benefits to consumers; instead it can drive up costs for consumers in other ways.
In addition, replacing the current system with a flat cap would distort market dynamics and materially affect the ability of networks to facilitate and incentivise innovation. Interchange is a balancing mechanism in a ‘two-sided’ market that balances the needs of both consumers and merchants; interchange is not revenue to Visa.
3. Ban or introduce limits on surcharging – Visa continues to oppose merchant surcharging; merchants should not be allowed to surcharge customers for using secure and reliable electronic payments. However, if no ban on surcharging is introduced, Visa supports the introduction of limits on the level of surcharging for card transactions.
4. Enforcement of surcharging rules – Regardless of whether surcharging is banned or limits are introduced, it is clear that enforcement by a statutory body is needed to effect change and protect consumers from unnecessary costs at the checkout.
“Interchange and surcharging are inherently linked, because interchange is a component of a merchant service fee, and many merchants use surcharging as a tool to recover that cost. However if payments regulation is updated to capture higher-priced competitors that currently fall outside the payments regulation, we would see a price reduction for merchants and less pass-through of costs to consumers,” continued Mr. Karpin.
In its submission Visa also considers that any significant policy changes be balanced by economic and market impact assessments.
“Given interchange is a balancing tool in a two-sided market, any changes will have an effect on how much consumers spend with merchants. The effect of redistributing the cost of payments needs to be very carefully considered, this is not as simple as reducing costs on one side of the market and expecting the net effect to equal that reduction,” he said.
Visa has actively participated in previous reviews by the RBA, the Federal Government’s FSI and the Treasury’s review of the FSI recommendations and will continue consultation through the RBA Review.
Visa Inc. (NYSE: V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks — VisaNet — that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.
For more information visit www.visa.com.au and @VisaNewsAU.
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