Visa's Proposal: A Potential Relief for Small Retailers

Visa is considering reducing the interchange fee for small merchants to a 2.2 cent flat rate for in-store transactions. This possible change is not simply a rearrangement of pricing, but could result in substantial savings for small retailers. Presently, these businesses are required to pay up to 0.2% of the debit card transaction value.

The Potential Impact on Retailers

The proposed change could be a boon for retailers. As an example, a retailer would only pay 2.2 cents instead of 20 cents on a A$100 debit card transaction. However, the proposal must be activated by the retailer’s bank, and it seems that some of the major players may not be on board.

Banks’ Reaction to the Proposal

Banking Day, a local media outlet, suggests that the Commonwealth Bank of Australia (CBA) is not likely to participate in this program. CBA is the country’s largest merchant acquirer and debit card issuer. The same reluctance is anticipated from Westpac. The reason for this hesitance is clear: by signing up to the offer, these banks will collect less revenue from Visa debit card transactions processed under the program.

On the other hand, the National Australia Bank (NAB) and the Australia and New Zealand Banking Group (ANZ) are expected to be more open to the proposal.

The Possible Win-Win Situation

Grant Halverson, CEO of McLean Roche, comments that the Australian RBA’s figures for merchant pricing at 2.2 cents could offer acquirers a new margin if they avoid passing this to retailers. In the second quarter, the Reserve Bank of Australia estimated that retailers’ average total merchant service fee for accepting Visa or Mastercard debit transactions was 0.51% in the September quarter. This is significantly higher than the average total merchant fee of 0.34% incurred on transactions processed by Eftpos Australia.

In summary, Visa’s proposed changes could potentially provide considerable savings for small retailers, though the responses from banks will be crucial in determining the final impact.