New Incentives Needed To Take On Credit Card Players
Sydney Morning Herald
Wednesday May 16, 2001
A leading Australian technology company says Australia's electronic payments systems should be opened to support a wider range of marketing programs to resolve regulatory concern that all consumers were subsidising frequent flyer programs on credit cards.
The chairman of software company Catuity, Mr David Mac Smith, said the prospect raised last week that frequent flyer schemes would be curtailed by the Reserve Bank of Australia's reform to credit card fees was potentially a ``retrograde step".
Mr Mac Smith said if the payments system was instead opened to more marketing programs, merchants could encourage consumers to use forms of payment other than just credit cards, such as debit cards.
``The essential issues of concern to the RBA and others can be addressed through the greater, rather than lesser, integration of marketing programs into the payments system with potentially huge benefits to everyone," he said.
Reserve Bank Governor Mr Ian Macfarlane last week attacked the current system that meant that all consumers in effect subsidised credit card usage through hidden fees on these transactions, ultimately passed through by merchants to all consumers (not just credit card users) in the form of higher retail prices.
The Reserve is in the process of ``designating" or setting credit card interchange fees after the Australian Competition and Consumer Commission raised concern that banks were charging too high a sum for merchant card services because of a lack of competition. Mr Mac Smith, whose company has provided marketing program software to the likes of Visa USA and several US banks, said the Reserve's concerns had been legitimate that all consumers were indirectly bearing the cost of these schemes.
``Opening up the payments system infrastructure will allow the market to determine the most efficient payment method and in time the RBA's concerns will disappear because the merchants will offer programs that incentivise the consumer to use the cheapest payment system for the merchant. For example, one of the objectives in America is to use these marketing programs to increase debit or ATM card use and merchants are offering different reward programs linked to different payment methods.
``Surely it is in everyone's interest that this valuable national asset is utilised to its maximum efficiency. The banks will receive the credit and goodwill of both the merchants and the consumers, which may help David Morgan of Westpac improve the image of banks in the Australian community."
© 2001 Sydney Morning Herald
Share This