128
129
CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
MOBILE WALLET ROUTING The RBA reports that mobile transactions have more than tripled in-store since 2019, with around a third of all contactless payments made by mobile device, wherein the fees on mobile debit (0.39% combined interchange and scheme fees) are more than double the typical cost of a card tap or insert transaction (0.16%) (see Graph 5.4). In August 2022, the RBA announced it now expects the industry to develop least-cost routing functionality for mobile-wallet transactions. This decision follows recent indications that implementing LCR for mobile-wallet transactions is more feasible and cost-effective than the RBA previously anticipated. After further consultation with the industry, the RBA, in November 2022, expressed the view that it is both feasible and desirable for the industry to deliver LCR functionality for mobile wallet transactions by the end of 2024. 320 The RBA’s announcement of LCR expectations for digital wallets comes as a very timely tool for merchants to manage their costs in the modern day. CMSPI estimates that almost $250 million of the $804 million in LCR savings could come from mobile wallets, and this share is only expected to grow with digital mobile routing enablement. 321
INDUSTRY READINESS ISSUES While the prospects of implementing LCR in Australia are promising, there remains a considerable gap between expectations and the current state of availability and enablement by providers and merchants. There have been issues at the network and acquirer level, with the (on average) lower cost EFTPOS network not developing online functionality until 2020. 322 Additionally, many of the predominantly issuer-owned regional acquirers (see Section 2) have been slow to enable LCR. In December 2023 RBA reported that in-store availability has significantly improved with availability at 99% of merchants. 323 However, merchant enablement is much lower at 65%, up from 54% in June 2023. 324
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
Graph 5.5 – Card Present LCR Availability and Enablement for Merchants in June and December 2023 325
0.00%
LCR online availability has proved to be more challenging. Even though LCR online was expected by end of 2022, five out of twelve providers had zero enablement and availability. In June 2023, and only one provider - Stripe - had over 50% LCR online enablement.
Card
Mobile
Online
Non-strategic merchants
Interchange Fees, December 2022
Scheme Fees, 2021/22
Graph 5.4 – Average Fees for Accepting Domestic Debit Cards by Entry Mode
322 First banks, retailers jump on eftpos’ digital payments offering - Finance - iTnews 323 Update on availability and enablement of least-cost routing for merchants - Data as at December 2023 (pub- lished February 2024) | RBA 324 Update on availability and enablement of least-cost routing for merchants - Data as at December 2023 (pub- lished February 2024) | RBA 325 https://www.rba.gov.au/payments-and-infrastructure/debit-cards/least-cost-routing/update-on-implementation. html
320 https://www.rba.gov.au/media-releases/2022/mr-22-39.html 321 CMSPI estimates: https://cmspi.com/news/breaking-news-what-merchants-need-to-know-about-the-rbas- latest-payments-update/
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