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

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