Bank inquiry demands cheaper tap-and-go debit payments by April

Shayne Elliott CEO ANZ Bank appeared before the House Economics Committee at Parliament House in Canberra on Wednesday 11 October 2017. Fedpol. Photo: Andrew Meares Banks face growing pressure to provide retailers with a cheaper way of accepting tap-and-go debit payments, with the government’s banking inquiry setting the industry a deadline of April to address merchants’ concerns.

Lenders could also face further probing from the competition watchdog, after the inquiry called for an investigation into whether customers were misled by the banks’ move to blame hikes in interest-only mortgages on regulatory action.

Currently, tap-and-go payments on debit cards are processed through the Mastercard and Visa networks, rather than the lower-cost eftpos system, which could not support contactless payments until recently.

Retailers complain they are paying hundreds of millions of dollars in extra fees under the arrangement, prompting pressure and threats of regulation from the Reserve Bank last month.

Although banks have recently said they will change in line with the RBA’s wishes, the House of Representatives inquiry, chaired by MP David Coleman, has now said if banks don’t comply by April they should face regulation from the RBA.

“The committee recommends that banks be required to give merchants the ability to send tap-and-go payments from dual-network debit cards through the channel of their choice,” the inquiry’s report said.

“Merchants should be able to choose whether to route these transactions through eftpos or another channel, noting that consumers may override this merchant preference if they choose to do so.”

The issue was raised repeatedly in the committee hearings in October, and at the time ANZ chief executive Shayne Elliott committed to making the change.

A Westpac spokesman on Friday said now that the eftpos system had been upgraded, it was reviewing how it would provide the feature to merchant customers in the future.

Commonwealth Bank signalled it was working on the issue, but said the matter was “complex” and required an industry response.

National Australia Bank also said the industry needed to work together on the change.

“We understand some merchants may want to elect which network they want transactions to be routed through, and we are currently building capability to enable this,” NAB’s spokeswoman said.

According to latest RBA figures, merchants are charged 0.26 per cent, on average, for a debit contactless payment on eftpos, compared with 0.58 per cent if the payment is processed by Visa or Mastercard.

Mr Coleman also called on the Australian Competition and Consumer Commission to look at the round of interest-only mortgage rate hikes earlier this year, as part of a probe into home loan pricing.

The watchdog should investigate whether some banks misled their customers by blaming the mid-year hikes of about 0.3 percentage points on speed limits imposed by the Australian Prudential Regulation Authority (APRA), the report said.

Analysts believe the hikes added to banks profits, as well as helping them slow down their interest-only loan books.

Another competition concern raised by the inquiry was the major banks’ slow progress in signing up to “comprehensive credit reporting” – a scheme in which banks share data on their customers with smaller rivals.

The government is forcing banks to sign up to the process by next year, and Mr Coleman said it should introduce legislation to make this happen “as soon as practicable”.

Separately, APRA on Friday said it would look into how much capital banks held against “higher risk” mortgages as part of a review in 2018, after global standards were agreed upon. This review is not expected to impact the total capital levels across the industry.

This story Administrator ready to work first appeared on Nanjing Night Net.

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