News

Australia's Cashcard recommends replacing ATM interchange with direct charging model

July 8, 2004

SYDNEY - Payment services provider and ATM operator Cashcard Australia Ltd has recommended the Reserve Bank of Australia (RBA) consider reducing ATM fees as part of potential market reforms.

According to a report in The Age, the RBA gave participants in the ATM and EFT/POS markets until July 9 to make fresh submissions on its potential re-regulation of the markets through designation, whereby it would bring the markets under its control.

The RBA's move came after the Australian Competition Tribunal (ACT) in May overturned a determination by the Australian Competition and Consumer Commission (ACCC) clearing the way for zero inter-bank interchange fees on debit card transactions. At the time, the ACT said zero interchange was not in the public interest.

Under the potential reforms, the RBA wants to remove interchange -- the hidden fee that financial institutions charge each other when a consumer withdraws money from an ATM owned by their bank.

Cashcard said it supported replacing the ATM interchange system and current "foreign" ATM charges (charged by a consumer's bank to help defray interchange paid to ATM owners) with a direct charging model.

Under a direct charging model, interchange fees would be eliminated; ATM operators would be allowed to charge a convenience fee and card issuers to charge a small transaction fee.

"An ATM direct charging regime implemented in an optimal manner will be in the community interest," said Cashcard Australia chief operating officer Greg Monaghan in the Agereport.

He said such an approach would result in lower fees charged at popular ATM locations, as well as increase competition to drive down average cardholder fees. "Both the community and the ATM industry win with this approach," he said.

The ATM Industry Association (ATMIA) Australasia said it supported Cashcard'sm recommendations.

However, the Australian Merchant Payments Forum (AMPF), in its submission, recommended the RBA abandon plans to eliminate EFT/POS interchange fees, suggesting it instead focus on opening up the electronic payments system to greater competition.

The coalition of merchants and retailers, which includes the Australian Retailers Association, said the RBA's push to introduce zero interchange fees was based on a joint study between the central bank and the ACCC that was four years out of date and relied on incomplete data.

"Australia's EFTPOS is a world class system which is ubiquitous, efficient, secure, reliable and is well accepted by both consumers and merchants," the AMPF said.

According to the Age, the merchants said zero interchange fees would lead to higher prices charged to consumers by retailers, and reduced investment in the EFTPOS system, which would lead to eventual degradation of the network.