Sydney, 1 November, 2006: The Reserve Bank of Australia’s new rules on EFTPOS interchange today take effect.

EFTPOS interchange reforms are the second component in the Reserve Bank’s comprehensive retail payments systems reform program. The first stage was credit card reform which saw retailers benefit from a significant cut in interchange fees. 

Interchange fees are wholesale fees which are paid between financial institutions when customers of one institution are provided with card services by another financial institution. Interchange fees are the mechanism used by financial institutions to allocate or share the costs of payments systems between the merchant and cardholder.

David Bell, Chief Executive of the Australian Bankers’ Association (ABA), said: “It was always understood that the Reserve Bank reforms to the EFTPOS system would result in higher merchant service fees for retailers who accept EFTPOS transactions. This is why retailers have been opposed to the reforms on EFTPOS interchange.”

“It is important to remember that credit card interchange savings will more than offset any EFTPOS cost increases for merchants. This means that retailers can still reduce prices for their goods and services.”

Retailers in general are major beneficiaries of payments systems reforms initiated and promoted by the Reserve Bank of Australia. Retailers stand to lose an estimated $170 million per year as a result of the EFTPOS reforms, but they have gained $730 million dollars per year as a result of the credit card reforms.  So they are ahead to the tune of $560 million per year.

Mr Bell said: “The Reserve Bank said that this package of payments systems reforms would deliver price falls of goods and services for consumers at the cash register. As the retailers are around $560 million dollars per year ahead as a result of this package of reforms, they should be lowering prices. The savings to retailers, even accounting for potential changes to EFTPOS interchange, are dramatic.”

In addition, retailers are now surcharging consumers for making payments by credit cards – these surcharges range from 1.3 to 1.7% of the costs of the transaction.

Notes for editors:

Overall retailers/merchant savings from interchange fee changes
	$million, annual
Credit cards*	730
EFTPOS/debit**	-170
ATM***	0
Total merchant saving ($million)	560
* Payments Systems Board Annual Report 2006, p 12. ** Data taken from Reserve Bank EFTPOS submission lodged with the ACCC on 21  March 2003. Figures represent changes in acquirer costs which are  approximated  to represent changes in overall merchant costs through Merchant Service Fees  (MSF). It should be noted that individual merchant impacts will depend upon  the  merchants' relative payments mix. The figures do not represent merchant  savings stemming from increased EFTPOS use relative to credit card use. These  savings could be significant long-term. *** ABA assumption that ATM reform will have marginal (zero) impact on merchant  costs.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439