Peter Mair, Crikey’s consumer banking
advocate, writes:


Bruce Baird’s House “Economics” Committee has come of age this week. For the first time in ages, we’ve seen open argument on the
regulation of card payment schemes, heard by more than the Reserve Bank
Governor. The best contributions were made by the retailers and,
inadvertently perhaps, the banks.

The bankers’
normally astute spokesman, David Bell, put a bullet hole in the floor very close
to his foot. While sensibly calling for “merits review” of regulatory decisions
made by the Reserve Bank, he nominated the Productivity Commission as the
independent referee.

One can only
say “bring it on”. Over recent years, Gary Banks, the Chief Commissioner, has
established his reputation as an outstanding public servant for
Australia: he
would be an excellent choice to unravel and expose some patent nonsense that has
come to characterise policy governing
Australia’s
retail banking and payment systems. “Banks on banks” has real appeal: he would
go through this lot like a packet of salts.

“Merits
review” is, of course, the Reserve Bank’s worst nightmare and they will do
anything to avoid it. That “anything” may well include pulling the pin on a hand
grenade which the retailers generously handed to the Committee. Australia’s
retailers genuinely deserve a round of applause for their effort on Monday.

The
retailers normally shun brawling in public but, thankfully, they have finally
had enough of being the collector of credit card taxes unfairly imposed on the
community by
Australia’s
banks. Their concern about bank
credit card schemes exploiting the community is now so deep that they have
offered to abandon their own (legitimate) claims to an interchange fee on EFTPOS
transactions, provided all “interchange fees” are set to zero. Others have
long advocated this – especially for credit card transactions – and regulators
in the UK and
Europe more generally are also headed this way. The RBA
even got close to it in a public announcement in 2001 before lamentably reneging
a few months later and backing off.

This single
sensible decision – no interchange fees in mature network payment systems –
would resolve a raft of issues which the RBA has toyed with
interminably but has not dealt with effectively.

For the RBA, “merits review” of its payments policy decisions would very likely be grossly
embarrassing. The recent report of the Regulation Taskforce (prepared by Gary
Banks, no less) has recommended that all regulatory decisions become
subject to “merits review” – the RBA is potentially on notice on two fronts.