- RBA Governor Michele Bullock acknowledged the central bank lacks authority to investigate payment service providers engaged in excessive surcharging.
- Competition is viewed as the potential solution to address over-surcharging issues in Australia‘s electronic payment ecosystem.
- The ACCC receives approximately 100,000 annual consumer complaints about unexpected surcharges, highlighting widespread consumer frustration.
Australia’s central bank is eyeing increased competition as a potential remedy for excessive surcharging in electronic payment services, as regulatory gaps leave both the RBA and ACCC with limited oversight powers to address consumer complaints.
The issue of payment processors charging excessive fees came to light during a recent parliamentary inquiry where the Standing Committee on Economics raised concerns about merchant service providers imposing above-average rates on transactions.
Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the regulatory limitations, stating: “There are some payment service providers that we don’t actually have any power over.” She further explained that while the Australian Competition and Consumer Commission (ACCC) technically has enforcement capabilities, they face significant challenges in implementation.
The regulatory blind spot has created an environment where some service providers have developed creative workarounds. “Payment services providers have found a way to make it seem to the merchants like they’re not paying anything,” Bullock explained, describing this as “a completely unintended consequence of removing [the] ‘no surcharge rules.'”
Despite these challenges, Bullock suggested market forces could ultimately provide the solution. “The typical way that these sorts of things would be worked out would be competition,” she noted. “If payment service providers are charging a lot more, then merchants would seek out [other services]. There’d be competition for someone to undercut them and so on.”
The scale of the problem is significant, with the ACCC reporting it receives at least 100,000 consumer complaints annually regarding unexpected surcharges. Many Australians express frustration about hidden fees appearing at checkout, considering them unfair and misleading.
RBA Assistant Governor Brad Jones revealed that the sharp increase in surcharging since 2019 was a key factor in prompting the bank to commission a review of the entire payment system. However, he emphasized the need for caution in reform efforts.
“When you think about the payment system, you have to think about a very broad ecosystem with lots of different stakeholders,” Jones said. “You’ve got consumers, you’ve got merchants, you’ve got acquirers, you’ve got card issuers, and then you’ve got the network operators, and each of them has different interests.”
Jones warned about potential unintended consequences, explaining that focusing on just one segment of the ecosystem could trigger a chain reaction that undermines reform objectives. The RBA is consequently taking a measured approach to policy options, considering how costs will be distributed throughout the system.
“Because one way or another, the costs in the system have to get distributed, and we want to make sure that’s done in a fair and equitable way,” Jones concluded.
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