In Australia, most debit point-of-sale transactions are routed though Visa and Mastercard’s global networks. Cards International noted that regulators there have issued a threat or a promise (depending on your point of view) that issuers need to prioritize the local domestic network, EFTPOS.
This means that when a user makes a purchase, and the EFTPOS network is present on the card, then the merchant will direct the transaction through the local network, assuming the POS terminal is capable. This appears to be similar to the Durbin Amendment in the U.S., which requires two unaffiliated networks on every debit card. Here’s how the regulator positioned the ultimatum:
Regulators in Australia are mulling the option of intervening to prevent domestic banks’ practice of routing debit card payments through Visa and MasterCard automatically.
According to a report by Reuters, the banks should end the duopoly and instead encourage retailers to use the local and cheaper network EFTPOS, which is controlled by domestic financial services providers and retailers.
Reserve Bank of Australia (RBA) governor Philip Lowe was quoted by Reuters as saying: “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.
“If that process doesn’t work then we would have to consider a regulatory solution.”
It is interesting that the owners of EFTPOS includes the very same banks who are currently prioritizing the global networks. Visa and Mastercard transactions are more expensive, so presumably most banks are favoring the interchange on the issuing side over less expense transactions processing for their merchants. More from the article:
A NAB spokesman said that the bank has been allowing its merchant clients to select their payment network since April 2018.
“We continue to roll out this service across our client base throughout this year,” the spokesman was quoted as saying.
The country’s other major banking groups – Commonwealth Bank of Australia, Westpac, and ANZ, did not comment on the issue.
As per RBA estimates, debit card transactions processed via Visa or Mastercard are over double as costly for retailers compared to EFTPOS.
According to the retailers’ association, this incurs additional costs of $200m-$340m on an annual basis.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
