Federal Treasurer Josh Frydenberg has written to the Reserve Bank of Australia (RBA), urging it to mandate least cost routing, a move that has been widely welcomed.

Least cost routing enables small business access to cheaper domestic debit payments schemes such as eftpos, rather than requiring transactions fees to only go through more expensive international providers.

Retail Drinks Australia CEO, Michael Waters, told The Shout: “Small businesses would benefit by the RBA requiring that banks adopt least cost routing, sending tap-and-go payments via the cheapest payment pathway to limit the costs incurred by merchants.

“The major banks were directed by federal parliamentary committees over three years ago to embed least cost routing in the merchant services plans they advertise to retailers.

“For too long, small businesses have been slugged with unnecessarily high fees from credit card networks, when there is a cheaper option. This is particularly unfair when many small businesses are trying to get back on their feet as a result of the ongoing pandemic – the least cost payment option should always be the default for essential debit card transactions for local businesses.”

National Retail Association CEO Dominique Lamb said that reforming the debit payments system would be crucial to helping retailers navigate the current COVID-climate.

“The NRA has been a strong and consistent advocate on the need to reform debit transaction costs and we commend the Treasurer for his leadership on this issue,” she said.

“The RBA can no longer ignore the myriad voices from industry and government demanding changes that update the payments system for the modern digital world.

“Mandating least cost routing would provide enormous relief for small retailers at a time when many continue to battle lockdowns and other restrictions.”

MGA CEO CEO Jos de Bruin said: “We have been advocating for Least Cost Routing to be implemented by the big four banks, as a default mechanism and the ability to access a more economical eftpos debit card payment gateway, for more than 10 years.

“Finally, the government has listened to small businesses, who, with the advent of tap and go and contactless payments, particularly during COVID, have experienced unsustainable and exponential cost increases to transact their customers debit card payments.

“This Least Cost Routing facility must be made available in all forms of payment including via mobile and digital wallets, online and any form of eCommerce.”

eftpos chief executive Stephen Benton said the Treasurer and the Federal Government should be commended for the decision to mandate least cost routing.

“Mandating least-cost routing as a default for merchants on mobiles and online as well as for the physical use of cards will be a major boost for local small businesses, jobs and communities as well as a key driver of the digital economy,” Benton said.

“It is essential that we guarantee our nation’s businesses access to competition and low-cost payments in a new, post-COVID world dominated by debit cards, mobile apps and eCommerce.

“The gradual adoption of Least Cost Routing at physical stores has already resulted in merchant fees on debit card transactions being reduced by hundreds of millions of dollars a year.

“However, as we move boldly into the new digital economy, this type of debit card competition is not currently available on platforms like mobile and eCommerce.

“The urgency of effective regulation in this area in a post-COVID economy is amplified by just how fast Australians have shifted to online and digital transactions in recent months.”

Andy Young

Andy joined Intermedia as Editor of The Shout in 2015, writing news on a daily basis and also writing features for National Liquor News. Now Managing Editor of both The Shout and Bars and Clubs.

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