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Payments Regulation in Asia
Price Signaling, Competition Within the Card Market, Interchange Caps, and Pricing Transparency – Executive Summary Merchant payment costs, as exhibited in the methodology section below, are complex and rising to the point where regulators are stepping in. To combat rising complexity and costs of acceptance, regulators and lawmakers must ensure that merchants have unfettered access to resources and tools that offer greater control over payment costs. These tools can come in the form of price signaling protections, co- badging requirements and routing rights, and transparency or disclosure standards. In addition, some governments have set price controls on the level of interchange. Measuring Success of Regulatory Interventions In this section of the report follows a review of the effectiveness of various government interventions to reduce merchant costs of acceptance or prevent merchants and consumers from incurring higher payments costs. This is done by examining regulatory interventions on price signaling, co-badging and routing, interchange caps, and pricing transparency by each country in scope and evaluating interventions against publicly available data on merchant payments costs.
Price Signaling
DEFINITION
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).
COUNTRY IMPLEMENTATION
Where national or local regulators do not intervene, the global network rules apply. For Visa and Mastercard, networks prohibit merchants from levying a fee on top of the transaction price unless applicable laws or regulations require that a merchant be permitted to impose a surcharge. Across the four countries reviewed, Australia is the only country in which surcharging has been regulated as a guaranteed right for merchants.
Despite the difficulties of surcharging, network prohibitions on cash-discounting are limited, however there are no regulatory guarantees in any of the countries surveyed that protect cash-discounting.
IMPACT ANALYSIS
In 2003, the RBA permitted merchants to surcharge at the cost of acceptance but must ensure that the surcharge is adjusted to be percentage-based or per item fee based on how the underlying costs are applied. Network rules in Australia have been adjusted to account for the national regulation, with Visa and Mastercard both requiring the surcharge to be reasonable and proportional to the cost of acceptance. In the years following the introduction of surcharging rights, there has been a
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