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MasterCard urges RBA to heed European Commission ruling on card fees

29 July 2002  |  5021 views  |  0 MasterCard urges RBA to heed European Commission ruling on card fees

MasterCard International is calling on the Reserve Bank of Australia to heed the European Commission's recent ruling on Visa's multilateral interchange fees and rethink plans to shake-up the market for credit charging in Australia.

The European Commission last week reached a compromise deal with Visa on lowering interchange fees for cross-border credit card transactions. The European Commission's decision acknowledges that a multilaterally-fixed interchange fee can lead to beneficial efficiencies and economies within a payment network and also contains an endorsement of a methodology for calculating interchange fees similar to the methodology traditionally applied by MasterCard (allowing for costs including transaction processing, fraud losses, credit losses and interest free periods).

In Australia, the RBA is expected to issue its decision on changes to Australia's credit card systems soon and, to date, has indicated that it plans to mandate changes that will drastically reduce interchange fees for domestic transactions.

Leigh Clapham, MasterCard senior vice-president and general manager, states: "In light of the apparent ruling by the European Commission, the RBA needs to explain why its proposed radical course of action will benefit Australia, when all other regulators who have considered the issue so far have concluded that a more balanced approach is called for."

MasterCard has consistently warned that such action would threaten the survival of four-party credit cards in Australia.

"With Wednesday's announcement by the European Commission, we certainly hope the RBA will now start to listen and not implement the drastic changes which will have significant detrimental effects for everyone who uses or accepts a MasterCard, Visa or Bankcard in Australia," adds Clapham.

He also points to a recent independent study conducted by PricewaterhouseCoopers which shows the cost to merchants of cash transactions to be much higher than credit card transactions.

MasterCard has mounted a long and loud campaign against RBA meddling in fee structures.

This latest outburst omits to mention a Commission observation that an assessment of MIFs for domestic payments, or in different payment systems than Visa, would have to be made in the light of the different market conditions applicable to such cases.

"In particular," notes the Commission. "The question of what constitutes a reasonable and equitable MIF might be answered differently in different circumstances.

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