Australian regulators are considering whether it is necessary to stop banks from automatically routing “tap and go” card payments through Visa and Mastercard, when retailers could be using EFTPOS, which is a local payment network that is cheaper, according to a report by Reuters.
Visa and Mastercard, as well as the four major banks, control all of the card payments in the country. Governor of the Reserve Bank of Australia (RBA) Philip Lowe told reporters that he wanted more retailers to take advantage of EFTPOS, which is owned by financial institutions (FIs) that are local to Australia.
The RBA said that processing through Visa or Mastercard costs twice as much as using EFTPOS. According to the retailers association, this can add up to $200 million to $340 million in extra costs annually.
“We have made it very clear to the banking industry that we expect them to develop the functionality to allow the merchant to choose which payment rails it goes through, the international schemes or the EFTPOS schemes,” Lowe said. “If that process doesn’t work, then we would have to consider a regulatory solution.”
Lowe said he would prefer not to intervene, as many banks said they would help with the cheaper routes.
“Regulating here is not the preferred option, but it is a fallback option if we don’t see the required change,” he noted.
The RBA is currently evaluating options moving forward, including reviewing payment regulations and potentially creating electronic banknotes. The bank will also look into how new payment technologies have affected how business is run.
“One of the possible reasons for the major banks dragging their feet on least-cost routing is that they each have very extensive relationships with the large international schemes – we will be exploring this in the review,” said Tony Richards, head of payments policy at the RBA.