Latest news with #interchangefees
ABC News
5 days ago
- Business
- ABC News
Warnings RBA's move to end card surcharges could hike banking costs or lower rewards points
The Reserve Bank's proposal to end card surcharges aims to save consumers money, but experts warn it could have unintended consequences. RMIT finance professor Angel Zhong told ABC News that, in practice, it could increase banking costs and leave Australians footing the bill. The RBA has said scrapping credit and debit card surcharges would save every adult using a card around $60 a year. The proposed changes include a cap on interchange fees, which means banks will miss out on about $900 million in revenue each year, according to Professor Zhong. "Banks will experience a deduction in their banking revenue, so they need to recoup it somewhere," she said. Surcharges are already banned in Europe and the United Kingdom. Professor Zhong said research into the international experience demonstrated a potential for increased costs to be passed on: A surcharge ban could lead to higher payment costs for small businesses, said Matthew Addison, chair of the small business peak body COSBOA. "Each other time [the payment providers] have lowered one fee, another fee has increased or the service package that is provided to the merchant changes," he said. "While one fee comes down, maybe the cost of the terminal will go up." If payments can no longer be passed on to customers, he said, small businesses might have to increase prices. "At the moment, small business is not in a position to absorb any more costs," he said. While the RBA's review found a lower cap on interchange fees would save business $1.2 billion a year and leave 90 per cent better off, industry groups and merchants have continued to express concern. "Big businesses aren't surcharging because their cost structure of merchant fees is less than a quarter of what small businesses are paying," Mr Addison said. ABC News asked ANZ, Westpac, the Commonwealth Bank and NAB how they planned to recoup costs if the proposals went ahead. The banks said they were unable to comment while they worked on submissions for the central bank by a late August deadline. Melanie Evans, deputy chair of the Australian Banking Association and chief executive of ING in Australia, told The Business that delivering more bang for buck to Australians was important. "But if the economics of our payment systems change then, of course, business models will also change accordingly," she said The banks want mobile wallets, such as Apple and Google Pay included in the review. "We would suggest that there's also opportunity to look more broadly at digital wallets and other forms of payments in the system," said Ms Evans. More Australians are using mobile wallets to tap and go, with payments up almost 30 per cent in the past year. Each time a customer pays using a mobile wallet, the banks pay the tech giants a fee. Professor Zhong said that was where banks could offset lost revenue from the cap on interchange fees. "It would require reforms in other areas in terms of fees charged by mobile wallets to Australian banks," she said. Stakeholders have until August 26 to make submissions regarding the RBA's proposals.
Yahoo
22-07-2025
- Business
- Yahoo
2 Real Reasons Amazon and Walmart Could Replace Your Bank
Move over credit cards, because they may not be the most convenient way to pay for goods at major retailers — specifically Amazon and Walmart. These two retail giants may be launching their own stablecoins, or a kind of cryptocurrency that's tied to a different asset that has a 'stable' price, like gold. Learn More: Find Out: If these companies do end up launching stablecoins, it could mean that you'll be able to pay through their apps and website directly, skipping banks and credit cards altogether. Why Amazon and Walmart Want To Launch Stablecoins PaymentsJournal reports that it could save these companies billions in transaction fees. Called the interchange fee, this cost is what retailers pay to banks when a customer uses a credit or debit card as payment. The amount can range from 1.5% to 3.5% depending on the credit card type (think Visa and Mastercard) and the payment method. Interchange fees are a major source of revenue for banks and can cost businesses big time. In 2024, U.S. merchants paid $187 billion in interchange fees, with around $111 billion of that being from credit card payments. This amount of credit card interchange fees merchants pay increased by 10% compared to 2023. In fact, this type of expense is the highest after labor costs. It does make sense, considering the number of cashless payments consumers make probably went up since COVID-19. Read Next: An unfortunate consequence of rising interchange fees is that consumers will also need to open up their wallets more. Nilson Report data shows that these fees could increase prices overall, leading the average American family to pay an additional $1,200 per year, or $100 a month. If stores keep paying more in interchange fees, the more you could pay next time you step into a store. If Amazon and Walmart issue their own stablecoins, they could bypass traditional credit and debit card networks, saving money and receiving payments instantly. Ideally, these savings would be passed onto consumers. This shift could put both companies in more control over their relationships with their customers, and — you guessed it — probably find more ways to earn customer trust and loyalty, leading to more sales. Getting Better Data To Sell to Customers Stablecoins could give Amazon and Walmart more control over almost all areas of payments and even the data it can get from you. Some credit card processors, for example, may charge chargeback fees. This is a cost merchants pay when money gets refunded if a customer disputes a transaction. Using stablecoins could give merchants more control when it comes to authorizing payments, which could lower or eliminate transaction disputes. Having more control could mean that Amazon and Walmart can design their online checkout pages, potentially offering a smoother experience for customers. For example, Amazon and Walmart could overhaul the one-click payment method, helping them earn more sales. Other features like instant refunds could show customers that these companies are easy to work with, earning their loyalty. Plus, having their own payments could mean being able to gather more data on you, including what you buy and how often. Using this personalized information could help them target you better and find ways to keep you buying, like loyalty programs that are actually enticing. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 The 10 Most Reliable SUVs of 2025 5 Types of Cars Retirees Should Stay Away From Buying This article originally appeared on 2 Real Reasons Amazon and Walmart Could Replace Your Bank
Reuters
15-07-2025
- Business
- Reuters
Australia looks to scrap surcharges on most card payments
SYDNEY, July 15 (Reuters) - Australia's central bank on Tuesday proposed to scrap surcharges on most debit and credit card payments for consumers while lowering interchange fees paid by businesses, steps that would save the two groups around A$2.4 billion ($1.57 billion) a year. In a consultation paper on the proposals, the Reserve Bank of Australia said surcharges and fees were no longer in the public interest and invited feedback from interested parties by August 26. The RBA judged that surcharges on debit and credit cards, including Mastercard (MA.N), opens new tab and Visa (V.N), opens new tab, no longer achieved the intended purpose of steering consumers to make more efficient payment choices. The RBA said avoiding surcharges had become harder as cash usage declined and there were challenges with enforcing current rules. The central bank's most recent triennial consumer payments survey found that the share of consumer payments made in cash had fallen from around 70% by number in 2007 to 13% in 2022. "Removing surcharging would make card payments simpler, more transparent and help to increase competition in the card payments system," the RBA said. Capping and lowering interchange fees, which merchants' banks pay to cardholders' banks, would benefit around 90% of Australian businesses, the RBA said. Cutting interchange caps would benefit small businesses the most, while putting caps on foreign interchange fees would help to lower fees for all businesses accepting international cards. The RBA also proposed to require card networks to publish the fees they charge, making it easier for businesses to shop around for a better deal. The central bank said it intends to publish its conclusions and an implementation timeline for any regulatory steps by the end of the year. Visa and Mastercard did not respond immediately to requests for comment. American Express (AXP.N), opens new tab has a separate agreement with the RBA and is not subject to interchange rules. ($1.5288 Australian dollars)
Associated Press
24-06-2025
- Business
- Associated Press
Hidden B2B Interchange Fees Are Quietly Draining EBITDA — Some PE Firms Are Fixing It
Structural inefficiencies in B2B card fees are quietly costing firms millions — with up to 43% in recoverable value impacting EBITDA and valuations. FORT LAUDERDALE, FL, UNITED STATES, June 24, 2025 / / -- Revolution Payments, a firm specializing in B2B and government payment optimization for over 25 years, works with private equity firms to identify configuration changes that allow commercial card transactions to qualify for lower-cost interchange categories — typically without operational disruption. In one case, a portfolio company processing just $300,000 per month in commercial card volume reduced fees by 43%, saving $144,000 annually. That one change increased enterprise value by more than $5 million, based on typical industry EBITDA multiples — and that's before reviewing the processor's rate. Another B2B firm, according to company records, is saving over $150,000 per month in unnecessary interchange fees — more than $1.8 million annually. At 10x–12x multiples, that translates to an estimated $18 to $22 million in added enterprise value. The optimization required no system or workflow changes — only a processor change capable of supporting the configuration. The Portfolio-Wide Opportunity Most private equity firms manage multiple B2B-focused companies. Applying this type of optimization across just 5 to 10 companies could result in tens of millions in unrealized value — simply by addressing a cost structure that is rarely reviewed in diligence or day-to-day operations. Up to 80% of credit card processing fees have nothing to do with the processor's quoted rate. Instead, the bulk comes from interchange — fixed fees determined by Visa and Mastercard based on how transactions are submitted. Commercial cards qualify at one of four interchange categories. There can be over 1.5% in cost difference depending on how data like invoice numbers, tax amounts, and customer codes are transmitted. If these fields are missing or configured incorrectly, transactions are silently downgraded, adding 50–150 basis points in cost — automatically. Why It Gets Missed This often goes undetected because most payment reviews focus only on processor markups — not interchange, where up to 80% of card acceptance fees actually reside. Fees labeled 'EIRF' or 'Standard' are red flags of improper qualification. But even when those aren't present, subtle issues like incorrect Merchant Category Codes (MCCs) or missing Level 2/3 data can silently downgrade transactions to more expensive categories. There are over 1,000 unique interchange categories set by Visa and Mastercard, many of which apply specifically to commercial and government cards. In the B2B space, commercial transactions alone can fall into one of four interchange tiers — with as much as a 1.5% cost swing before a processor's fee is even added. Still, most businesses assume they're properly configured when, in reality, critical inefficiencies often go unnoticed — and unaddressed. Industry-Wide Oversight Gaps Unlike other financial services, the payments industry is largely unregulated. There are no licensing requirements or certifications to sell merchant services. As a result, even well-meaning advisors may lack the expertise to configure systems for optimal interchange qualification — especially across high-volume B2B or government transactions. 'These are structural inefficiencies hiding in plain sight,' said Sean Jones, President of Revolution Payments. 'They're not solved by switching processors or renegotiating rates — they require precise configuration and expertise.' A Strategic Lever for Private Equity Revolution Payments automates the back-end process required to ensure commercial transactions qualify for the most favorable interchange rates. The firm works directly with CFOs, controllers, and PE operating partners to identify inefficiencies and apply changes with minimal internal lift. For firms looking to improve portfolio profitability, reduce structural cost, and increase exit multiples, interchange optimization presents a quiet but material lever. Learn More To request a case summary or confidential review, visit: Sean Jones Revolution Payments +1 301-790-3450 email us here Visit us on social media: LinkedIn Legal Disclaimer: EIN Presswire provides this news content 'as is' without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
RNZ News
28-05-2025
- Business
- RNZ News
Are credit card rewards schemes worth it?
Photo: 123RF Credit card reward schemes are likely to be scaled back further as pressure goes on interchange fees, Consumer NZ says, but most aren't delivering value for many New Zealanders, anyway. On Tuesday, Kiwibank and Air New Zealand announced they were cutting ties and Kiwibank would no longer offer an Airpoints credit card. Kiwibank pointed to increasing regulation of interchange fees, which are the fees paid by the bank that processes a transaction to the card issuer. The Commerce Commission has already introduced new standards to reduce these fees, which led to a reduction in some credit card rewards in 2022. More reductions are expected to be announced soon, to come into force at the end of the year. Consumer NZ said its analysis showed that credit card reward schemes were only benefiting big spenders who used their cards frequently and paid off the balance in full every month. People would generally need to spend $25,000 on their cards over two years, and not pay interest on it, to make a rewards scheme worth the fees that the cards charged. "Low spenders, and those with interest-bearing debt, don't benefit from rewards and are effectively subsidising high spenders. We don't think this is fair so we have supported the regulation of interchange knowing this would likely result in card issuers scaling back rewards programmes, increasing card fees or cancelling schemes altogether," a spokesperson said. "Interchange regulation will also reduce the cost for merchants of accepting card payments. This should, in theory at least, result in lower card payment surcharges for consumers. Unfortunately there's no guarantee these savings will be passed on to consumers though so we have been calling for surcharge regulation for a number of years. The commission is expected to consult on this later in the year." Banking expert Claire Matthews, of Massey University, said it was to be expected that rewards schemes would be pared back as interchange fees reduced. "Although it does depend on the level at which they are capped and how that is split between the parties. However, those fees have been a key source of the revenue to fund the rewards so any reduction can be expected to be passed on."
