Big four banks to face scrutiny over small business transaction fees
Politicians will grill representatives from Commonwealth Bank, NAB, Westpac, and ANZ on next week, and the fees paid by small businesses will be front of mind.
Australia’s big four banks will face parliamentary scrutiny next week, with both Labor and Coalition lawmakers set to demand answers about the card payment fees levelled on small businesses.
Members of the Standing Committee on Economics will grill representatives from Commonwealth Bank, NAB, Westpac, and ANZ on Thursday and Friday, with politicians from both sides of the aisle confirming the fees paid by small businesses are front of mind.
Merchants pay fees to their payment technology providers, card systems, and the banks each time they process a tap-and-go card transaction.
For businesses unable to swallow those fees, the cost of accepting tap-and-go payments is passed to consumers in the form of surcharges.
Those surcharges for tap-and-go card payments cost Australian consumers $4 billion a year, according to Canstar analysis.
Labor MP and Standing Committee on Economics member Jerome Laxale this week labelled those fees a “rort”, and launched a public campaign to abolish digital payment transaction fees across the board.
“I just want to make it very clear that, as a former small-business owner, I do not begrudge any small business for passing on these exorbitant fees,” Laxale told Parliament on Tuesday.
“The business I used to own and run paid over $1,000 a month to accept digital payments.
“With small-business owners grappling with rent, electricity and other overheads, absorbing thousands of dollars in fees is just not feasible.
“More and more are passing this charge on, and that’s fair enough.”
But Laxale argued those transaction fees could evaporate if the Australian business community latches on to technology like the New Payments Platform, which can offer fee-free money transfers.
“Next week at public hearings I’ll be pushing the banks to explain why they’re holding fee-free digital payments back,” Laxale added.
Big banks to face questions on least-cost routing
Laxale is not the only parliamentarian focused on the costs faced by small businesses when accepting card payments.
Liberal National Party MP and deputy chair of the Standing Committee on Economics Garth Hamilton said least-cost routing — the ability for merchants to automatically channel tap-and-go debit payments through the eftpos system, rather than the more expensive Visa, Mastercard, and American Express systems — remains a topic of great interest.
Data from the Reserve Bank of Australia shows the averaged-sized merchant, with annual debit transactions totalling $675,000, could save $1,150 per year with LCR enabled.
Access to LCR is near-universal for merchants using payment systems provided by the big four banks.
But access to LCR does not equal enablement.
As of December 2023, LCR was active for just 52% of merchants using NAB payment systems for in-person transactions.
Less than half of all merchants using CBA, Westpac, and ANZ systems had LCR enabled.
“I’m very interested in pursuing conversation on least-cost routing”, Hamilton told SmartCompany on Thursday.
Separately, the Reserve Bank of Australia plans to seek stakeholder views on the effectiveness of LCR, and if further regulatory intervention is appropriate, as part of its new review of retail payments regulation.
While Laxale is advocating for digital transaction fees to be abolished, Hamilton said payments technology providers “need to maintain a revenue stream” to pay for the complex infrastructure they provide to merchants and consumers.
The hearings will commence on Thursday morning, when Commonwealth Bank CEO Matt Comyn steps up to face the committee.
New payments lobby pipes up
The Independent Payments Forum is a new industry group that counts the Council of Small Business Organisations Australia (COSBOA) as a collaborator. It has welcomed Laxale’s push, while shying away from some of his largest reform proposals.
Transferring retail payments to the NPP is “a nice idea but it’s a long way off,” the group said Thursday.
“We can’t afford to drop the ball on fixing the fundamentals of cards fees by getting sidetracked with industry ‘blue sky’ distractions and Kool-Aid drinking,” it added.
Instead, the group says lawmakers should first consider issues like the sweetheart deals big supermarkets can negotiate with payment service providers, which lock in lower fees than those passed on to small business merchants.
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