Notwithstanding our previously stated position on the long-term sustainability of interchange fee regulation, below APCA offers its views on how the identified issues confronting small merchants may be addressed through modifications to the existing regime, with a focus on enhancing competition and transparency. Transparency for Merchants The Issues Paper notes that the number of interchange fees rates has increased, leading to complexity. The widening of the range and lower rates for merchants” can be seen “strategic as evidence of increased market power for large merchants relative to schemes. However, it has also meant that smaller merchants, particularly those that have agreed to “interchange fee plus” pricing, are often subject to higher per transaction costs, especially if their customers use premium cards. The Issues Paper also notes that the move towards “account-based processing” similarly obscures the link between the card being accepted and the associated cost to the merchant. While we would assume the developments noted above have caused some level of dissatisfaction amongst small merchants, further clarity on the scale and nature of the problem would assist in determining an appropriate response. Further, in making any changes, the public policy objectives should be clear. If the underlying public policy objective is one of achieving fairness between small and large merchants, then this should be clearly spelt out. The Issues Paper suggests that there may be means, both visually and electronically, to make the interchange fee associated with a particular card identifiable to the merchant at the point of acceptance. The costs and benefits associated with enhanced transparency need to be carefully considered. For example, merchants knowing the cost of accepting a card at the time of the transaction may be desirable. However, it is difficult to imagine a situation where a significant number of merchants will make discrete decisions for each type of card based on given that most merchants are seeking to provide a good customer experience and “colour”, will rely on simple acceptance and surcharging rules. As it is difficult to imagine discrete merchant decision-making on each transaction, we would not endorse any regulatory requirement for a technological solution, particularly “real-time” given the lack of clarity on the scale and nature of the problem. Rather we would support acquirers being able to compete and innovate. We believe that the marketplace for merchant acquiring is competitive. Given the contractual relationship between the merchant and the merchant acquirer, it is probably more important for the merchant to understand the arrangement they are entering into than to receive “real- time” information. On this basis, we would support an exploration on enhancing transparency
Notwithstanding our previously stated position on the long-term sustainability of interchange fee regulation, below APCA offers its views on how the identified issues confronting small merchants may be addressed through modifications to the existing regime, with a focus on enhancing competition and transparency. Transparency for Merchants The Issues Paper notes that the number of interchange fees rates has increased, leading to complexity. The widening of the range and lower rates for “strategic merchants” can be seen as evidence of increased market power for large merchants relative to schemes. However, it has also meant that smaller merchants, particularly those that have agreed to “interchange fee plus” pricing, are often subject to higher per transaction costs, especially if their customers use premium cards. The Issues Paper also notes that the move towards “account-based processing” similarly obscures the link between the card being accepted and the associated cost to the merchant. While we would assume the developments noted above have caused some level of dissatisfaction amongst small merchants, further clarity on the scale and nature of the problem would assist in determining an appropriate response. Further, in making any changes, the public policy objectives should be clear. If the underlying public policy objective is one of achieving fairness between small and large merchants, then this should be clearly spelt out. The Issues Paper suggests that there may be means, both visually and electronically, to make the interchange fee associated with a particular card identifiable to the merchant at the point of acceptance. The costs and benefits associated with enhanced transparency need to be carefully considered. For example, merchants knowing the cost of accepting a card at the time of the transaction may be desirable. However, it is difficult to imagine a situation where a significant number of merchants will make discrete decisions for each type of card based on “colour”, given that most merchants are seeking to provide a good customer experience and will rely on simple acceptance and surcharging rules. As it is difficult to imagine discrete merchant decision-making on each transaction, we would not endorse any regulatory requirement for a “real-time” technological solution, particularly given the lack of clarity on the scale and nature of the problem. Rather we would support acquirers being able to compete and innovate. We believe that the marketplace for merchant acquiring is competitive. Given the contractual relationship between the merchant and the merchant acquirer, it is probably more important for the merchant to understand the arrangement they are entering into than to receive “real- time” information. On this basis, we would support an exploration on enhancing transparency