As a part of Regulation II in the U.S., card issuers are required to provide access to payment networks unaffiliated with Mastercard and Visa. The intent of this requirement is to provide merchants with cost effective options for routing purchase transactions.
This is currently getting some scrutiny as merchants and the “unaffiliated networks” point out that card technologies, such as contactless transactions and Secure Remote Commerce, can make routing choice more difficult.
Routing choice has also emerged as a hot topic in Australia, where, according to an article in Brisbane Times, regulators are considering a requirement that contactless debit cards be routed through the domestic network, Eftpos. Choice is one thing, mandates are another.
Here’s how this issue is playing out:
The Reserve Bank of Australia’s payments board is currently considering the issue of “least-cost routing”, which allows retailers processing tap-and-go payments to elect to direct these through the Eftpos network rather than global systems like Visa and Mastercard, where higher fees may apply.
The Reserve Bank of Australia’s Payment Systems Board will be considering whether further regulation is needed to give merchants control over tap-and-go fees.
Control over how these payments are processed has been a fiery issue for smaller retailers, with sectors from coffee shops to pubs finding they until recently had to process tap-and-go as credit transactions that often cost more.
Banks and providers have started to roll out options to direct these payments through debit rather than credit but Visa has hit out at the suggestion that “merchant choice” options be compulsory.
“A mandate would mean we were divorcing consumers from their set of choices,” said Suzan Kereere, head of Visa’s global merchants and acquiring arm.
A blanket move to direct payments towards debit networks could have implications for consumers around things like the fraud protections offered, Ms Kereere said.
The warnings clash with the views of smaller retailers, who have long argued the retailer should have ultimate control over how payments are processed.
Council of Small Business of Australia chief executive Peter Strong dismissed Visa’s calls for consumer choice. “The consumer has no idea how the process works either, so it’s just self-interest,” he said of the choice argument.
Ms Kereere rejected this, and also questioned assertions from Australian retailers that the cost of accessing international payments networks like Visa were consistently as much as four times more than domestic debit processing.
However, Visa said it could not detail typical processing costs because they differed so much depending on the retailer and their banking relationship.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group