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Competition key to cheap fees

TRUE competition in the setting of merchant and bank credit card interchange fees will drop prices by an average of one per cent, says Retail Traders Association manager Brian Reynolds.

Mr Reynolds said the fees had been too high for some time.

“There is no doubt in the minds of my organisation and retailers that the cost of operating EFTPOS and credit card facilities is a significant burden,” Mr Reynolds said.

“Consumers ultimately bear these costs although the ability of retailers to fully cost recover is sometimes limited by the extent of price competition in the market place.”

Credit card interchange fees are charged on the transmission of information from a merchant’s bank to a purchaser’s bank following a credit card transaction.

The Australian Competition and Consumer Commission estimates banks collect $1.2 billion a year in credit card fees from merchants.

It also estimates banks make about a $630 million profit on the credit card interchange service.

The ACCC is taking the National Australia Bank to court, claiming it has conspired to fix credit card interchange fees.

If found guilty, the NAB faces large fines. The case could also help to reduce the credit card interchange cost. NAB managing director Frank Cicutto accused the ACCC of using the case to force changes before a reasonable review of the situation had taken place.

Combined Small Business Associations of WA president Oliver Moon said small businesses had been accepting credit card fees as a matter of choice.

“Banks have always had the upper hand. If you want a credit card, you have to pay the fee,” Mr Moon said.

“The fee is one hell of a cost. When you start adding credit card fees onto the other fees small businesses pay, it is quite an impost.”

BankWest head of payment operations Ron Silvestri said the interchange fees were necessary to cover network costs, transmission costs and monitoring costs.

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