Part D â Understanding and improving industry performance (PDF ...

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12.5.1. Removing regulatory barriers As a starting point, there are obvious measures that can be taken to reverse the effects of current regulations relating to MPTP processing and EFTPOS approvals that have created barriers to competition in the payment systems market. In considering alternatives to the exclusive MPTP arrangement enjoyed by Cabcharge, the inquiry has identified the features needed to support the MPTP and how these features can be supported through outcomesbased regulation, in conjunction with the collection of incab data. The inquiry has found that a specific MPTP data collection provider is not necessary for the processing of MPTP payments or for the provision of additional services required by the program (such as driver identification and trip data). Implementation of the inquiry’s recommendation to mandate the installation of meters in taxis that can transmit all trip data direct from the vehicle to the Taxi Services Commission will mean that any type of EFTPOS provider can process MPTP member rebates. Inquiry finding è The current arrangements relating to MPTP data collection and the approvals process for EFTPOS terminals in taxis act as barriers to entering the payment processing market and should be changed. 12.5.2. National regulation The lack of access to Cabcharge branded cards has also reduced competition nationwide in markets for taxi payments processing. However, the Victorian Government has little power to effect change in this area. Competition law rests in the federal domain, with the ACCC being responsible for ensuring that payments system arrangements comply with the competition and access provisions of the Commonwealth Competition and Consumer Act 2010. As discussed above, the ACCC has endeavoured to address the commercial barriers to entry in the past and continues to monitor Cabcharge’s behaviour. The inquiry supports the ACCC’s continued scrutiny of this issue. The Reserve Bank of Australia (RBA) also has a key role in the operation of the payments systems in Australia and the inquiry has followed with interest the bank’s recent review of card surcharging (see case study). The inquiry wrote to the review to request that it consider any and all measures that will help to ensure that fees charged for electronic payments for taxi services are consistent with those that would be charged in a competitive market. 27 27 This submission is available on the inquiry’s website. The Australian Taxi Drivers Association also brought practices in the taxi industry to the attention of the review: For thirty years the Australian taxi industry has been at the forefront of unreasonable credit card surcharge practices, and consumers of taxi passenger credit services have suffered the impost of excess charges by the dominant monopolistic supplier of those services. 28 The RBA’s decision to vary the No-Surcharge Standards to allow payment schemes to limit surcharges may have significant consequences for taxi passengers if Visa and Mastercard decide to act. These credit card providers will be able to restrict the amount businesses charge customers for transactions on their cards and take action against businesses that impose excessive surcharges on customers. 29 The RBA could also effect change by using its powers to designate Cabcharge as a payment system. The Payment Systems Regulation Act 1998 provides the Board with statutory powers to designate payment systems. This would enable the Board to impose an access regime, make standards, arbitrate disputes and give directions to participants in the system. In 2001, the RBA designated the Bankcard, MasterCard and Visa credit card systems as payment systems under the Act. In 2003, the RBA determined standards for the designated schemes that lowered interchange fees, removed restrictions on merchants charging customers for the use of a credit card and imposed an access regime to facilitate entry by new players. Taxi-specific payment instruments, such as those of Cabcharge, are not currently designated payment systems under the Act and are not required to comply with any surcharging standards or access regimes set by the RBA. The inquiry would support the designation of Cabcharge instruments as payment systems in order to impose regulations that will facilitate greater competition and potentially reduce services fee to a reasonable level. Inquiry finding è The ACCC and the RBA are well placed to oversee and enforce regulation of anticompetitive behaviour in the payments systems market. Ideally, regulation should be consistent between states to reduce costs for service providers. 28 ATDA (June 2011), Submission to the RBA into the Review of Card Surcharging, p.2 29 Malcolm Edey (2012), ‘Current Agenda in Retail Payments Regulation” Speech to Cards and Payments Australasia seminar, Sydney, 20 March Understanding industry performance CUSTOMERS FIRST 261
The Reserve Bank of Australia’s review of the No-Surcharge Standards The RBA’s Payment Systems Board is responsible for promoting the safety, efficiency and competitiveness of the payments system in Australia. In 2011, the RBA’s Payment Systems Board conducted a review of card surcharging due to concern about merchants exploiting payment processing fees as a source of revenue. The Board highlighted that excessive ad valorem surcharges were common in the taxi industry, as well as for online transactions or in circumstances where consumers feel they have few alternatives to using a scheme card. The Board also noted that the merchants who impose high surcharges tend to be those with market power. Surcharges in excess of the cost of card acceptance and the blending of surcharges for different cards reduces the efficiency of the payment system by removing price signals to consumers about the relative cost of different payment methods. As a result of the review, the Board has indicated that it intends to relax the standards to allow schemes (Visa and Mastercard credit and Visa debit) to limit surcharges. More specifically, the Board has stated that: In light of the views expressed in consultation and developments in surcharging practices in recent years, the Payments System Board considers that there is a case for varying the Standards, by allowing the schemes to limit surcharges to a reasonable cost of acceptance, while at the same time ensuring the schemes’ rules cannot prevent full cost recovery by merchants. 30 The Board specifically makes it clear in its consultation document that pressure from consumers and ‘moral suasion’ alone will not be enough to change the surcharging behaviour of merchants, particularly those with some market power. The Board believes that some merchants may “require an element of compulsion to bring surcharges into line with card acceptance costs”. 31 12.5.3. Regulating the service fee While there is potential for national reforms to bring change in the future, the inquiry remains concerned about the 10 per cent surcharge currently imposed on Victorian taxi users. The fact that half of these fees overall are funnelled back to drivers, NSPs and operators strongly suggests that the 10 per cent is unnecessarily high and that there will be significant consumer benefit in lowering the charge to a level where these payments are minimal or eliminated. The inquiry is also concerned that addressing some of barriers to entry into payments processing will not be sufficient, of itself, to lower the surcharge. The weak competition between taxi operators and networks indicates that competition between processors is likely to be much fiercer to attract networks, operators and drivers to use processing equipment (by offering higher rebates), rather than lowering prices to consumers. While Cabcharge provided no defence of the 10 per cent surcharge to the inquiry, the inquiry did receive representations from some other payments processors arguing that reducing the allowable service fee would cause damage to competition. CabFare told the inquiry that without access to the processing of Cabcharge branded cards and the MPTP, the rebate to operators and drivers is the principle competitive proposition of the third party players. Not only will a reduction in the surcharge do little to improve their market position, but CabFare argues that: Varying the service fee without access by third parties to the Cabcharge cards will result in the exit from the market of Third Party EFTPOS providers and at a low level could result in the exit of Cabcharge and the return to a cash only transaction. 32 This view was echoed by other market participants who told the inquiry that competing payment processor providers would not be able to grow market share if such rebates are not offered. 33 While the inquiry acknowledges that third party EFTPOS providers rely on the surcharge to compete with Cabcharge, ultimately the inquiry finds that these competitive practices do nothing to benefit consumers. 3031 30 Reserve Bank of Australia (RBA) (December 2011), A Variation to the Surcharging Standards: A Consultation Document, RBA Sydney, p.1 31 Ibid., p.11 32 CabFare, Presentation to Taxi Industry Inquiry, 21 February 2012 33 Ambassador Taxis, Taxilink and Cabways, Submission to the Taxi Industry Inquiry, SS233, p.36 262
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