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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
Payments made through Australia’s domestic debit card network, EFTPOS, typically incur the lowest expenses for merchants, averaging around 0.3 percent of the transaction value. This cost has remained relatively stable over the past decade (see Graph 5.2). 317 By contrast, the average merchant fees for both Mastercard and Visa debit card transactions are higher at around 0.5 percent, despite showing a downward trend since the introduction of LCR expectations in 2019. 318
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DUAL-NETWORK DEBIT CARDS In contrast to the U.S., the RBA does not require the issuance of dual-network debit cards (DNDCs, see Glossary) for all issuers. However, the RBA expects issuers with more than 1% of the value of debit transactions to issue DNDCs and acquirers to “promote” LCR by enabling DNDCs and access to LCR- enabled merchant accounts, respectively. It is worth noting that these are “expectations” set by the RBA and are not currently set regulations, although the RBA has stated that it will place regulations if expectations are not met.
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Visa Debit
Mastercard Debit
eftpos
Visa Credit Mastercard Credit
Amex
Channel In-Store In-Store In-Store
Debit Transaction Type
2021
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2024
Inserted Card
x
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x
x
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Sep-23
Change
Contactless Card
Mobile Wallet
x x
x
x
Graph 5.3 – Average Merchant Fee by Card Type, September 2020 versus September 2023 313
Ecommerce
The end result is that total Australian merchant fees are on the rise. Between 2020 and 2023, Visa and Mastercard credit rates had the highest increase (0.14% and 0.09% respectively) while EFTPOS increased 0.08% due to new market rates released in 2022 for mobile and card-not-present transactions, following its rollout of online services. 314 Section 5.4.2 – Co-Badging and Routing in Australia Due to its mandate to promote competition and efficiency in the Australian payment system, the Reserve Bank of Australia (RBA) has stated that it “strongly supports the issuance of dual-network cards to consumers and the provision of least-cost routing (LCR) functionality to merchants.” 315 The Australian Labor Party has published estimates that debit card LCR could result in approximately $804 million of benefit annually for Australian merchants if it was applied across the board. 316 To this end, the RBA has introduced important industry requirements to introduce LCR for contactless, ecommerce and mobile wallet debit card transactions, although it has stopped short of mandating LCR across all debit card transactions (see Table 5.8).
Table 5.8 – RBA Expectations to Enable LCR by Transaction Type
ECOMMERCE ROUTING In contrast to the U.S. where historically emphasis has been placed on PIN debit routing, the RBA has focused its routing efforts on contactless debit, with most banks and payments providers introducing some form of LCR functionality by the middle of 2019. 319 However, this perspective has changed, with in-store volume shifts to increasingly higher cost digital and online channels (see Section 3). Following these trends, the RBA has set expectations for all payment facilitators and gateways to offer online routing in 2023.
317 https://www.rba.gov.au/publications/bulletin/2022/sep/the-cost-of-card-payments-for-merchants.html 318 The RBA pushed for the issuance of co-badged cards prior to 2019. https://www.rba.gov.au/publications/bulletin/2022/ sep/the-cost-of-card-payments-for-merchants.html 319 Least-cost Routing of Debit Card Transactions | RBA
313 From November 2022 to October 2023, CMSPI estimates that Australian merchants paid $4.1 billion in credit and $1.8 billion in debit card fees.
314 https://cmspi.com/aus/en/could-eftpos-bring-competition-to-online-routing-in-australia/ 315 https://www.rba.gov.au/payments-and-infrastructure/debit-cards/least-cost-routing.html 316 https://web.archive.org/web/20220404235516/https://alp.org.au/policies/better-deal-for-small-business
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