Payment Card Interchange Fees - Biggest Monopoly Rip Off?

I have been researching this recently. (Not becoming a merchant, just out of interest)

Damn is it complicated.

  • Different fee rates for Credit vs Debit Cards.

  • Different fee rates for Rewards vs Non Rewards.

  • DIfferent fee rates for in person vs online.

Interesting how even though it is the merchants who pay the fees, it is everyday consumers who actually pay in terms of prices higher than they otherwise would be. A great business model from Amex, Mastercard, Visa and the Banks, when you think about it.

Only the third point above has a possible justification in terms of different fee rates (since there could be more fraud with online transactions).

Apparently Merchants are charged more for Credit vs Debit, because there is 'increased risk of non payment'. However, I thought the credit contract was between the bank and the cardholder (and the cardholder pays an interest rate for this risk). The merchant has nothing to do with the credit contract. So I cannot see how banks can justify charging more.

With regard to the second point, again, rewards cards are agreements between Bank and Cardholder. Merchant has nothing to do with it.

If it weren't for this opague and gouging monopoly system, we would already be completely cashless.

The only reason there are some places that are still cash only is because they don't want parasities taking a cut of their revenue.

There is some cost to eftpos terminals in terms of computers etc, but they should be heavily regulated like utilities (Water, Electricity, etc) to get a fair return, not a supernormal return where executives get million dollar bonuses.

And then there are some banks that 'provide analytics based on cardholder data'. That's rubbish as well. Banks should not be profiting from that either.

Comments

  • +1

    Competition fails again while the phrase "competition lowers prices" gets repeated endlessly and the masses ignore reality.

    Quite a feat really considering it's the masses money that's removed from them.

  • +4

    Biggest Monopoly Rip Off?

    ok? make your own worldwide recognized payment platform

  • Online v offline IS about risk. There's higher interchange for key vs swipe vs dipped transactions is based on the risk of fraud/chargebacks. Keyed transactions are those where the number is typed in, usually cardholder not present transactions, where it's very easy for fraud to take place.

    There's historically been higher interchange for 'premium' cards (Visa Signature/Infinite, MasterCard World/World Elite) as these have benefits attached.

    Amex/Diners charge retailers more similarly due to the better offerings their products provide (in theory).

    I agree it's complicated/confusing. I personally am against the cap, as I'm a points wh*re, and am very bitter about my airmiles earnings being hobbled because of the RBA's intervention, but I understand why they've done it. Essentially the less well off in society (cash users, predominantly) were subsidising the well off as the cost of the higher IC fees was buried in the cost of products/services, which everyone pays regardless of whether they're benefiting from the rewards.

    So, yes the retailer is hit with the fee, but they're not paying for it from their pockets.

  • [Golf.clap] well said old chap. Meanwhile, back at the ranch….

  • My previous provider was further complicated -

    Standard Sales
    Electronic Sales
    International Sales with separate authorization fee
    Commercial Sales
    Debit Card Sales
    Super Premium Sales
    Premium Sales

    All with different Visa and Mastercard Rates

    EFTPOS fees were a flat fee per transaction.
    Monthly terminal fee
    Cancellation Fee
    $35 Fee for Chargebacks

    However, whilst new provider has different fees for card present/MOTO it doesn't charge fees for chargebacks.

    It is just not cards that is complex. This article details plans of NAB to ditch some of its Business Fees.

    "We have more than 400 fees across our operations and we see a big opportunity to radically reduce this number by simplifying the way we charge fees, and in many cases, removing them altogether.”

    In a sign of the sheer number of fees in the bank, and their complexity, the booklet explaining business bank fees ran to 48 pages