The past financial year saw an alarming $1.9 billion in scheme fees burdening businesses and consumers, compelling calls for action from the Reserve Bank of Australia (RBA). Scheme fees, charged by payment networks such as MasterCard, Visa, and American Express, are applied whenever a bank processes card payments for a business and are also incurred to maintain the card provider's customer service.
These fees largely impact banks and, subsequently, their business clients who struggle with higher costs. Card providers frequently compete for lower scheme fees, transferring the financial burden to end-users through elevated prices on goods and services.
In the 12 months leading up to June 2023, these scheme fees, amounting to roughly $1.9 billion, were a substantial 43 percent increase from the previous financial year. This spike outpaced the 16 percent increase in card transactions during the same period.
Scheme fees are typically a percentage of the total transaction amount, although fees may also be levied based on the number of merchant outlets a bank services, regardless of transaction volume.
The unregulated growth of these charges has pushed RBA Governor Michele Bullock to consider regulatory intervention. Such measures could mandate transactions to default to the least costly card network, encouraging these networks to reduce their fees.
Ellis Connolly, head of payments policy at the RBA, cited that the bulk of this fee increase stems from a resurgence in international card transactions following the end of COVID-19 restrictions. He emphasized on Tuesday that the fees, though substantial and growing, are still "complex and opaque," reinforcing the need for increased transparency.
"There is notable variation in scheme fees among different card networks," Mr. Connolly mentioned during his address at the Merchant Risk Council Conference in Melbourne. He argued that greater fee transparency would aid merchants in understanding the costs and making more informed choices about which network to use for debit transactions.
However, Mr. Connolly admitted that efforts by the RBA to disclose specific fee data were thwarted. International card networks denied permission to publish details on their charges when prompted.
"We were unable to release information on individual network fees as international card networks declined our request for permission," he revealed.
Highlighting the ongoing quest for clarity, Mr. Connolly added, "We will bring the push for greater transparency over scheme fees into our upcoming review for further consultation."
