2 PAYMENT METHOD PROFILES: CARD
In other jurisdictions like the U.S., national surcharging is largely dictated by card networks. Such rules may include requirements to pre-register with your acquirer 30-days prior to implementing a surcharge, ensure the surcharge is applied only to the applicable card type, and ensure the surcharge does not exceed pre- determined maximum value. In many countries where surcharging is allowed, variations in the global network rules can hinder a merchant’s ability to apply a surcharge or influence the type and amount of surcharge permitted. 192 Interchange Caps Interchange caps are a price ceiling set by the government or voluntarily agreed to by the card network for the per transaction interchange revenues issuing banks receive. One of the earliest adopters of interchange fee limits was Australia. In 2003, the Reserve Bank of Australia recognized the negative impact growing card acceptance fees were having on the economy. 193 Shortly thereafter they instituted a weighted average interchange cap on covered four-party card transactions. After Australia, several other governments followed suit over the next twenty years. One of the other most notable interventions was the European Commission capping interchange fees for credit at 0.3% and 0.2% for debit in 2015. Co-badging Co-badging denotes a single payment card enabled with two or more unaffiliated payment networks, enabling transactions across multiple networks. Often, local cards will have global card networks co-badged on them for international acceptance when their cardholders travel abroad. Countries like the United States and Australia have paired co-badging and merchant-choice routing requirements or incentives. The goal is to empower merchants to choose over which network to route a transaction. The rationale is that merchants, as the ones bearing card fees and often fraud costs, are best suited to choose the network that minimizes these fees (a practice known as Least Cost Routing). This dynamic fosters competition among card networks who otherwise may not have incentives to attract merchant volumes since they would likely focus more on driving revenues to card issuing banks to increase network uptake. Additionally, having multiple networks co-badged on cards implies effective conversions, higher availability, and increased uptime due to network redundancies. There may be functional variations aside from cost that will dictate merchant routing choice, such as a lack of online functionality for some local networks or integration challenges between global networks and local digital wallets. However, local networks are motivated to enhance functionality to incentivize merchants and cardholder usage. Only two markets have implemented mandated co-badging, despite dozens of markets operating domestic debit networks.
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