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Payments Regulation in Asia
Price Signaling, Competition Within the Card Market, and Interchange Caps – In-Depth Price Signaling Price signaling involves the conveyance of information about a company’s pricing intentions to competitors, customers, or the broader market, either explicitly or implicitly, with the aim of influencing market behavior or expectations. For retail payments, price signaling can come in the form of a card surcharge (typically a percent-based fee levied on of the customer’s bill should the customer pay with a payment card) or cash discounting (typically a percent-based discount subtracted from the customer’s bill should the customer pay with cash). The motivation for surcharging or cash discounting is to recoup costs of acceptance for card payments or to steer customers to lower cost payment methods. With a surcharge, the merchant intends to recoup card fees by levying a surcharge equivalent to the costs of acceptance. With a cash discount, the merchant intends to steer customers to cheaper payment methods, like cash. The effectiveness of prices signaling varies depending on the context and the parties involved.
CARD SURCHARGING
Once a merchant signs a contract to accept card payments from a certain network, the merchant is regulated by the rules levied by the card networks, which can be quite complex and restrictive. Surcharging, the practice whereby a merchant adds a charge to a transaction based on the customer’s chosen payment method (e.g., card and other payment methods), card type, or card network, is broadly prohibited by the card network rules, and, in markets where surcharging is permitted by national or local law, card network rules can complicate surcharging implementation. In addition, while default network rules typically restrict whether and how merchants can surcharge, some jurisdictions have mandated surcharging rights for merchants, overruling the default card network rules (Table 2).
Country
Surcharging Rules
Merchants are allowed to surcharge up to the cost of acceptance
Australia
India
Network rules apply
Japan
Network rules apply
Network rules apply, but local merchants, such as taxis, have been reported to apply a surcharge on card transactions 18
Singapore
Table 3. Surcharging Rules by Country
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