The Australian banking regulator is to impose a cap on interchange fees that it is estimated will cost the local payment card industry A$170 million per year.
The Australian Central Bank said it had imposed the limit, a 75% drop on current highs according to Bloomberg, in order to promote competition in the market. Currently the Visa payment system offers much greater returns on debit card processing fees than the electronic funds transfer at point of sale, or EFTPOS, system. This disparity has left the market effectively tipped in favor of Visa.
In the bank’s view, if the current arrangements were to remain unchanged, it is highly likely that the Visa debit system would grow at the expense of the EFTPOS system, simply because of the structure of interchange fees, the Australian banking regulator said in a statement.
The banking authority said it hoped the new regulations would narrow the disparity in applied processing fees from around 60 cents to 20 cents, the Dow Jones reported. The cap is due to become effective in November of this year.
Meanwhile, industry players such as MasterCard and Visa have been asked to voluntarily comply with the new standardized debit card fees by the start of July. Both said they would, but while Visa said it needed time to digest the repercussions of the changes MasterCard has already suggested that they are not in the best interest of the consumer. According to Bloomberg, the central bank wants Visa to cut fees from 40 cents to 15 cents per transaction.