tyro

A small celebrity-friendly restaurant in Utah is finally doing what many merchants have only dreamed of doing for a long time — taking on a part of the payment card industry’s powerful but flawed system for securing card data by fining merchants for failing to secure their data.

Stephen and Theodora “Cissy” McComb, owners of Cisero’s Ristorante and Nightclub in Park City, Utah, allege that the bank, and the payment card industry (PCI) in general, force merchants to sign one-sided contracts that are based on information that arbitrarily changes without notice, and that they impose random fines on merchants without providing proof of a breach or of fraudulent losses and without allowing merchants a meaningful opportunity to dispute claims before money is seized.

It’s the first known case to challenge the heart of the self-regulated PCI security standards.

A MINOR glitch has left potentially thousands of shoppers across Australia unable to purchase items from stores using ANZ Eftpos machines. The problem occurred at 1.40pm and lasted for just over an hour.

An ANZ spokesperson said: ''we experienced a degraded service on some of our communication links for a short time this afternoon, which resulted in a small number of Eftpos transactions timing out.''

Services have now been restored. It's the second glitch in a month to affect ANZ.

The variations would allow scheme rules to impose a limit on surcharge levels up to the reasonable cost of card acceptance.

The merchant cannot be prohibited from applying different surcharges for different card types, either across card schemes or within a card scheme.

Blended surcharges are limited to the lowest cost of card acceptance, ensuring that blended surcharging is not also associated with excessive surcharging for lower-cost card schemes.

On 29 September 2011, the Federal Court of Australia ordered EFTPOS Payments Australia Ltd (ePAL) to publish corrective advertisements in relation to statements made on its behalf by its Managing Director concerning the effect on consumers and retailers of changes to interchange fees payable on EFTPOS transactions.

Australia’s only independent electronic payments provider, Tyro Payments, welcomed Justice Jacobson’s decision on the basis that it promotes “a culture of transparency and fairness in banking”.

Banks must continue to upgrade their payment networks or risk losing more customers if more incidents like yesterday's Commonwealth Bank outage occur, which caused ATMs and EFTPOS capabilities to shut down for two hours.

Jost Stollmann, chief executive of payments company Tyro, says the outages are "completely unacceptable".

"Retailers are having a hard time already, and for this to happen is incredibly frustrating. We just have to increase the reliability of the system."

Retailers are scrambling to ensure their payment systems are up-to-date after an Eftpos failure on Saturday caused shopping chaos at the first weekend of the busy Christmas season.

Eftpos machine systems went down at Woolworths, Dan Murphy's, Big W, Dick Smith and BWS during peak afternoon hours, affecting 3,200 stores across the country.

Jost Stollmann, CEO of Tyro Payments, which is an independent Eftpos merchant service provider, says such system failures can be especially damaging. "The failure has to become totally unacceptable."

SHOPPERS had to abandon their trolleys on Saturday at Big W, Dan Murphy's, Woolworths and Caltex unless they could pay with cash.

In the year 2011, consumers and retailers have been victims of numerous glitches, failures and outages at major banks and now at the major retailer and this in peak Christmas trading.

“It is not rocket science. Retailers worried about disruptions or delays caused by their incumbent EFTPOS provider have now a reliable alternative. Choice and competition is good!”, says Jost Stollmann

EFTPOS chaos led to shoppers abandoning their trolleys yesterday, delivering another blow to the already struggling retail sector in the lead-up to Christmas.

Shoppers at Big W, Dan Murphy's, Woolworths and Caltex were affected by the system failure at 2.30pm, which meant goods could be bought only with cash.

The crisis struck on the first weekend of the Christmas sale season and only days after Woolworths chief Grant O'Brien declared weak conditions were buffeting Australia's retail sector.

Tyro Payments Limited, the independent provider of EFTPOS services and the progenitor of EFTPOS business for more than the past 14 years, takes into consideration the side of the enterprises that would greatly be affected by this plan, saying in a statement by CEO Jost Stollmann, “Every Australian should have a low cost access to the funds in their own Government guaranteed bank account. Every merchant should have a low cost means to accept card payments.”

"We are the only independent EFTPOS provider to the underserved and overcharged merchants", says Jost Stollmann.

The perception in Australia is that you can not challenge the bank oligopoly, but Tyro is alive and kicking delivering 100% availability and innovative security. The banks sit on old legacy systems. They recently raised fees by $150 million.

Why? Because they can get away with it?

Rises in credit and debit card interchange fees will create income of $1.23 billion for banks this financial year and doesn’t reflect the level of service the providers deliver, leading independent EFTPOS provider Tyro to urge businesses to consider alternative options.

Tyro grew by 50 percent last year and processed some $2 billion in credit and debit card transactions, servicing 5,000 retailers, pharmacies and practices. Stollmann said merchants should consider switching to an independent option, if they’re unhappy with the service provided by their current debit and credit terminal provider.

“They should give the alternative a go. Banks have to perform or lose the business.”

Independent eftpos provider Tyro has estimated that banks have pocketed an extra $150 million from retailers and customers since new credit and debit card interchange fees were introduced on 1 October.

Tyro has also calculated that the interchange charges will increase bank income by $300 million from $900 million when the GFC hit in 2008 to an estimated $1.23 billion this financial year.

CEO Jost Stollman said the fee increases are unjustifiable as he described the service as “unreliable”.

“These fee increases came during a year when the big banks failed to provide the reliable and regular eftpos service that consumers expect,” he said.

SHOPPERS and retailers could hand banks an extra $150 million this year in credit and debit card "interchange fees".

An analysis of banking fees by Tyro -- which runs a rival payment network to Eftpos -- calculates that interchange charges will jump by $150m to $1.23 billion this year as a result of Eftpos fee changes this month. When the global financial crisis hit in 2008, the income from interchange fees was $900m.

Tyro chief executive Jost Stollmann yesterday described the Eftpos changes as a "fee grab".

In a bid to carve a larger slice of the Eftpos pie, Stollmann says merchants should consider switching to an independent option if they’re unhappy with the service of their current provider.

 “They should give the alternative a go. Banks have to perform or lose the business,” he says.

 It’s becoming increasingly important for small business owners to rethink their Eftpos provider, with new researching showing Eftpos volumes continue to grow as the role of cash diminishes.

Smartest move: Initially it was to trust the three founding engineers and give them the money to develop the business, Stollmann says.

But more broadly, the smartest move has been creating a reliable system. "We have created a system that we market as never failing and being safe," he says.

"We concentrated on getting the basics right and now we can build on that."

AUSTRALIAN banks’ credit and debit card related ‘interchange’ fee income will increase by $300 million from about $900 million when the Global Financial Crisis hit in 2008 to an estimated $1.23 billion this financial year.

The fee increase comes as banks are expected to announce record industry profits of about $17 billion over coming weeks.

Only three weeks ago on 1 October they introduced a fee increase that adds $150 million in full year income.

More Australian consumers are shifting to plastic money to do their purchases. As a result credit and debit card transactions are expected to reach 4 billion in 2011.

He claimed that Tyro delivered 100 per cent availability of its credit and debit card acquiring system and reported a 50 per cent growth in 2010 when the firm processed $2 billion credit and debit card transactions for 5,000 retailers and pharmacies.

Australia's first new entrant into the Eftpos business in more than 14 years, Tyro Payments Limited is more than a little concerned about the recent proposed redirection of interchange fees.

What its CEO Jost Stollmann finds equally disturbing is the lack of fight shown by the retailers this decision will affect.

Tyro solutions are uniquely merchant-focused, enabling reduced fees, greater productivity, better cost-management and a superior payment experience for consumers.

Now it appears merchant surcharges could also apply to EFTPOS, thanks to a new fee system applied for purchases over $15. From October 1, 2011, the retailer’s bank will pay a fee to the customer’s bank for any transaction using a ‘savings’ or ‘cheque’ account.

EFTPOS is owned by ePal – a company part-owned by the Commonwealth, ANZ, Westpac and NAB banks as well as supermarket giants Coles and Woolworths.

It is estimated the big banks could earn as much as $150 million per year from the fees, while the increased cost is most likely to be passed on by retailers to consumers in the form of surcharges for EFTPOS transactions.

Tyro Payments processed a volume of 27.4 million credit and debit card transactions for a value of A$2 billion during the 2010/11 financial year.

Tyro also processed 8.8 million Medicare payment rebates.

In the month of June 2011, the transaction volume reached 2.55 million transactions for a value of $183 million. This  represented growth of 51 per cent by volume and 44 per
cent by value over June 2010.

Break-even is "in sight" for specialist payments provider Tyro Payments, though management is not putting a date on this milestone-to-be.

Jost Stollmann, chief executive of Tyro, said that, taking into account the commission arrangements for one partner (who back-loaded expenses into 2011) and foreign exchange losses in 2011, the company recorded a "significant improvement in operating profit" over the year.

Stollmann said the firm was now targeting hospitality sector to complement its early strength in medical practices. He said Tyro technology could handle bill splitting and tipping at the point of sale with mobile devices, for example.

Visa and Mastercard have launched a new campaign against credit card merchant service fee surcharging, spurred it seems by the recent changes to the Eftpos system.

Banks in Australia earn about $1.8B a year in merchant fees. This is a drag on the economy and is not in any way justified by the poor levels of innovation in the payments industry generally. The banks spend an enormous amount of money on gesture innovation without any attempt to actually make money flow any quicker or cheaper. 

MATT WORSWORTH: Jost Stollmann's company Tyro provides the EFTPOS banking services for many retailers, competing against the banks for the business.

He now faces paying the charge without receiving in return anything as a card-holding bank, so is at an instant disadvantage.

JOST STOLLMANN: For our merchants and for us this is a very significant change in the fee structure in the Australian market. I mean take the example of a small newsagent. He's actually competing with Coles and Woolworths when he sells his newspaper and if he is charged 5 cents more or less on each transaction, makes a different to his bottom line.

Jost Stollmann says if the banks pass on the charge to retailers and pocket it as card-holding banks, they could reap $150 million a year.

JOST STOLLMANN: I think there's an interesting campaign by one of the major banks which is called Break Up, so wouldn't it be nice if one or two banks would say enough is enough?

Any fee increase affects small businesses with small purchases, such as bus tickets and newspapers, due to it being more expensive to process those payments through EFTPOS.

Considering debit card transactions have grown from 313 million in 1996 to 2.5 billion in 2011, Tyro regards this matter of vital importance to the Australian community, especially banks.

“After the Federal Court judgement, banks should reconsider the fee increase. Instead, they should keep EFTPOS a safe and low cost debit card solution for Australian retailers and consumers,” said Stollmann.

Speculation that ALDI’s action was partly encouraged by its acquirer – Tyro Payments – remains entirely unconfirmed just that as this story was being written.

However it makes some sense that ALDI would use Tyro. ALDI is, after all, a German company and Tyro is run and partly-owned by Jost Stollmann, a man who in a former life was a senior German politician.

Tyro may well suffer the most of all the financial institutions involved in EFTPOS debit card processing, as its entire business is focussed on card-acquiring.

Tyro note: Tyro is not an acquirer for ALDI Stores

“It is unfair that retailers and consumer will or may be burdened while Coles and Woolworths are not affected. There is no more equal playing field, not for Aldi and not for Tyro’s small and medium merchants.”

Stollmann said any fee increase will make it hard for newsagents to accept eftpos payments for small ticket purchases like bus tickets or newspapers.

“They are already doing it tough. How will they compete with Coles and Woolworths?

Independent electronic payments provider, Tyro Payments, was quick to welcome the decision.

"Today’s judgment criticises ePAL for failing to be clear and open about the impact of raising eftpos interchange fees,” Tyro chief executive Jost Stollmann said.

"There is no more equal playing field, not for ALDI and not for Tyro’s small and medium merchants. In the light of the court’s decision, banks should reconsider the fee increase.”

The Federal Court has ruled in favour of German grocery chain Aldi in a case against new eftpos fees.

Australia's only independent payments provider, Tyro Payments, has welcomed the court's decision, saying it means greater transparency.

The German grocery giant Aldi has won a Federal court case against Eftpos Payments Australia (ePal) today, with the court criticising ePal for not being clear and upfront about its new interchange pricing structure.

Tyro Payments, Australia's only independent payment provider, told Channel News it "applauds the decision to protect retailer and consumer rights through full and fair disclosure by promoting a culture of transparency and fairness in banking."

"It is unfair that retailers and consumer will or may be burdened while Coles and Woolworths are not affected," said Tyro Payments CEO Jost Stollmann.

Supermarket challenger Aldi has this morning been awarded a win in the Federal Court of New South Wales against EFTPOS Payments Australia Limited (ePal), which has been ordered by the court to clarify to consumers that they may be hit with extra fees for using the organisation's electronic payments service.

Justice Jacobson recommended the following be published by ePal in one major national newspaper and one paper in each of the state's and territories:

    There has been a range of comments in the media about EFTPOS's interchange fees. ePal, the company that manages the EFTPOS debit payment system, wishes to clarify aspects of planned changes to EFTPOS interchange fees and to correct statements made in a media release dated 12 August 2011, a column in the Herald Sun on 12 August 2011 and a media release dated 8 September 2011.

    ePal is aware that some acquirers are intending to pass part or all of these fee changes on to some retailers. It remains to be seen what such retailers may do in relation to their consumers as a result of these changes. ePal is also aware that other acquirers do not intend to pass on any of these fee changes to retailers.

    It is therefore premature to state with certainty what impact the planned changes will have at a retail level.

AUSTRALIA’s only independent payments provider, Tyro Payments, has today welcomed the Federal Court’s decision in the case ALDI Stores v EFTPOS Payments Australia Limited (ePAL).

Today’s judgement criticises EFTPOS Payments Australia Limited (ePAL) for failing to be clear and open that some retailers and consumers might be impacted by the decision to raise eftpos interchange fees.

Tyro Payments applauds the decision to protect retailer and consumer rights through full and fair disclosure by promoting a culture of transparency and fairness in banking.

An “unacceptable number” of payment system outages over the past 12 months has led the Reserve Bank of Australia’s (RBA) payment arm to warn the industry to boost innovation and stability or face regulatory intervention.

According to Tyro Payments CEO Jost Stollmann, these high-profile failures demonstrate the need for the industry to address its issues urgently, or face further regulation by the RBA and APRA.

“An EFTPOS outage results in abandoned sales immediately affecting the retailer’s bottom line. Even a small retailer loses hundreds of dollars in no time, not to mention the havoc and customer dissatisfaction.”

Stollmann says investment into new infrastructure innovation is needed to make sure downtime is reduced as much as possible.

“There has to be a move away from this idea that there is a primary data centre, and then a recovery data centre. There needs to be two data centres that are live and active,” he says.

“There is too much thinking about dealing with disaster than avoiding disaster. The way the modern consumer pays for things, they expect those systems to be up and running. Innovation is needed, or the scope of these failures becomes more dramatic.”

The Reserve Bank of Australia's payments arm has warned the industry that it needs to improve innovation and stability in the country's payments infrastructure or face a new wave of regulatory intervention.

Jost Stollmann, chief executive at Tyro Payments, said the outages of the past year show the vulnerabilities in the payments system as it stands. He said the industry needed to address these problems urgently or face further regulation from the RBA and APRA.

"An EFTPOS outage results in abandoned sales immediately affecting the retailer's bottom line. Even a small retailer loses hundreds of dollars in no time, not to mention the havoc and customer dissatisfaction," Stollmann said.

AUSTRALIAN CONSUMERS and retailers were the victims of numerous glitches, failures and outages at major banks during the past 12 months.

The RBA’s Payment Systems Board Annual Report found that Westpac, National Australia Bank and Commonwealth Bank suffered a “number of difficulties” delivering consistent and reliable EFTPOS services to their customers in 2010-11.

In contrast, the only independent provider of EFTPOS merchant services – Tyro Payments – delivered with its technology, multiple switches and data centres 100 per cent system availability to its customers.

The state of play in the Eftpos market early in August was that Westpac and its subsidiary brand, St George, had written to merchant customers informing them that they had opted into the new Eftpos Payments Australia interchange model. This would involve Westpac and St George incurring fees, as merchant acquirers, and they would be passing those fees on to merchants.

Four banks and two retailers dominate the acquiring side of the Eftpos system. Two of those banks, Westpac and Commonwealth Bank, had decided to opt into the new Eftpos payment model, which EPAL had announced in March and would take effect in October.

Eftpos Payments Australia was aware that two acquiring banks had opted into the new multilateral Eftpos pricing model by August 12. This was when it issued a press release saying Australia consumers "should face no new charges following planned changes to Eftpos interchange fees."

Eftpos Payments Australia’s managing director, Bruce Mansfield, told the Federal Court yesterday that by early August two acquirers had opted into the new system, two had no plans to enter the system and two had yet to make their decision.

Jost Stollmann, chief executive of independent player Tyro Payments, said the revision of the code would be good
news for all players in the payments space — both for incumbents and smaller players.

"Tyro is very supportive of this comprehensive revision," he said. "We are very well aware that the industry needs
the trust of the consumer in security, reliability and fairness of the electronic payment world."

The reversal of interchange fees on Eftpos payments will be a drawn-out affair, with two major banks implementing the new charges five months late.

Coles and Woolworths, which self-acquire card payments at their stores and operate their own switches, will continue to present payments to banks under existing contracts, and thus continue to receive interchange fees from banks.

Tyro Payments is also hoping to stick with the status quo. Tyro is a specialist business that acquires merchant payments and has no other banking operations.

Whether Tyro will be able to earn interchange fees from issuers, as it does now, rather than pay them to issuers under the new regime, is contested. It will depend on the terms of its existing bilateral contracts.

Australia’s Federal Court has ordered EFTPOS system
regulator – EFTPOS Payments Australia Limited – to
stop claiming its upcoming changes to EFTPOS
wholesale interchange fees won’t be passed on to
consumers.

Justice Jacobsen yesterday issued the orders
following a court action initiated by ALDI
supermarkets protesting against changes in EFTPOS
wholesale fees due to come in from the 1st of October.

ALDI has gone to the Federal Court to stop the bulk of the banking sector - and Aldi's supermarket rivals Coles and Woolworths - from making what it claims are misleading and deceptive statements about the effect on consumers and merchants of new eftpos fee changes.

Aldi's formal action follows increasing disquiet from small retailers about the new interchange fees due to come into effect on October 1.

The business that manages the eftpos payment system, eftpos Payments Australia Ltd, known as ePAL, is a mutual partnership of banks and Coles and Woolworths.

Supermarket chain Aldi is making mischief over the forthcoming shift in Eftpos interchange fees and the associated repricing of merchant fees by banks.

On Thursday, Aldi served a statement of claims on Eftpos Payments Australia Limited, which is not yet public but is said to assert misleading conduct on the part of EPAL.

The Federal Court file categorises the Aldi claim as a consumer protection action and also lists the claim type as "mislead, or deceptive conduct".

EFTPOS fees are set to increase from October thanks to a decision by EPAL, the organisation created by the Reserve Bank and controlled by the major banks plus Coles and Woolworths. 

Oh, and I have noted that Coles and Woolowrths are set to not face any fee hike. Why the Reserve Bank would think it is smart to put the big banks and Coles and Woolworths in charge of the cookie jar given their addiction is beyond me.

SHOPPERS may face higher costs for using debit cards after Eftpos Australia admitted proposed changes to bank charges might be passed on to consumers.

In a backflip, ePAL yesterday sought to "clarify" elements of a media release, issued in August by chief executive Bruce Mansfield, which said that consumers would not face new charges.

Yesterday’s media release by eftpos Payments Australia Limited (ePAL), representing the banks, Coles and Woolworths, clarified that the eftpos interchange fee increase may burden consumers versus prior claims that Australian consumers should not face any new charges.

Banks should first deliver a safer, reliable and better payment experience to Australian consumers before they consider increasing fees. Yesterday a major bank reported yet again an EFTPOS outage. The industry is in dire need of innovation. That is what we demand from the industry and what Tyro delivers. We believe in fair and transparent fees.

The planned changes to eftpos interchange fees will commence to be implemented from 1 October 2011. It remains to be seen whether acquirers will pass part or all of any fee changes on to retailers and what retailers may do in relation to their consumers as a result of any changes.

It is therefore premature to state with certainty what impact the planned changes will have on retailers or then upon their consumers.

The actual ways of taking payments, though, is becoming more and more diverse as technology multiplies and slowly evolves the way people spend the money. It’s becoming a crucial choice for retailers whether to gamble and embrace new means of payments, like contactless and prepaid technologies.

Integration has become more complicated with the number of payment services being offered by retailers, as advances in online, mobile and near-field communications (NFC) expand the possibilities for retailers and consumers alike.

The Payments System Board will informally review ... the “no discrimination” provisions of the access regime for Eftpos introduced in late 2006, which may have been overtaken by the reshaping of interchange fees due to come into affect next month.

This stipulates that existing issuers of Eftpos cards must pay any new bank entering the Eftpos system an interchange fee no less than the fee payable by that issuer to an existing acquirer. This also applies to any merchant that self-acquires transactions.

More competition is needed between payment schemes before the Reserve Bank of Australia is likely to relax eight-year-old controls on credit card interchange fees.

“If we do not see any competition, [well] that is really how we got into the regulation in the first place. If one could see clear evidence that we have competition between card schemes and between competing payment mechanisms or both, that is at least a precondition that you could think about,” Glenn Stevens, governor of the RBA.

Collaboration between the major banks to develop an electronic addressing system to speed up payments has come to an end following the decision of BPay’s board late last week to abandon the three-year-old project.

The most recent estimate on the whole-of-industry cost of implementing Mambo is “upwards of half a billion dollars”, a figure quoted by former Reserve Bank governor Bernie Fraser in his report on switching bank accounts released earlier this month.

EFTPOS Payments Australia Limited (ePAL) has again sought to reiterate that its new interchange fees will not be passed directly on to the consumer or retailers, stating that they only affect financial institutions. However, it has remained quiet on whether the fees will indirectly affect consumers.

After the NSW Fair Trading Minister Anthony Roberts received advice from Westpac that the fee structure changes would result in an increase in fees for some retailers last week, he wrote to Federal Treasurer Wayne Swan, asking him to intervene.

CONSUMERS could suffer from increased EFTPOS charges, unless Australia’s big banks reject a looming deadline to raise fees.

Proposed new ‘interchange fees’ come into effect from 1 October 2011, with banks given the option to adopt or reject them.

A strong EFTPOS system requires investment by acquirers and merchants. It does not need banks to stop paying and start charging by levying a fee on EFTPOS access. This is an unjust and untimely burden on Australian acquirers, merchants and consumers.

Australian consumers are being warned they could pay more every time they use their bank cards because of a rise in EFTPOS transaction fees.

"The banks are going to be better off if they decide for the fee increase. Merchants and consumers risk that these costs will be passed on and they're quite significant because EFTPOS is the favourite payment means for Australian consumers," said Jost Stollmann

"Retailers are doing it very tough. It's not the time to raise fees. Retailers will have to face the increased cost or they will have to consider to pass it through to the consumers."

Jost Stollmann, the chief executive of Tyro Payments, has described the move as "unjust and an untimely burden" on merchants and consumers, who contribute to two billion Eftpos transactions each year.

"Small businesses and acquirers (retailers' banks) have invested significantly in deploying 700,000 Eftpos terminals across Australia, for the convenience of customers, but it will be the banks who stand to make a lot of money from these changes," Mr Stollmann said.

"A strong Eftpos system requires investment by acquirers and merchants. It does not need banks to stop paying and start charging by levying a fee on Eftpos access."

Merchants' banks will be charged a 5c fee for each transaction under the proposal, reversing the current system where a cardholder's bank pays a 5c fee to the merchant's bank.

There is a risk that the banks will pass on their higher costs to retailers, he said. I don't know why they wouldn't because they won't absorb them. The merchants then need to decide what to do about that, whether to absorb it or to increase prices to pass it on. He said low-margin businesses such as retailers would find it difficult to pass the increase on to customers, increasing pressure on sectors already challenged by a higher dollar and plummeting consumer sentiment.

All eyes will be on ePAL on Monday as its 14 owners approach a deadline that could affect the way Australian retailers use their Eftpos terminals. The new interchange fee arrangements, announced by Eftpos Payments Australia Limited (ePAL) in March, need to be either individually accepted or rejected by members, which includes the major banks and grocery retailers by Monday.

“It’s unjustified and untimely to increase the interchange fee for retailers... especially at a time when most of them are doing it tough,” said Stollmann.

The RBA is overhauling its payment systems. The RBA's concern is to ensure Australia's payment system is as efficient, open, competitive and adaptable to changing needs as it can be.

With retailers squeezed on multiple fronts, it is imperative they have genuine choice over payment providers and costs.Their transaction charges should reflect the cost of accepting different cards, and retailers should be able to manage card acceptance mix for lowest overall cost.

NSW Fair Trading Minister Anthony Roberts today called on the Federal Government to protect consumers from increasing fees for EFTPOS transactions.

Mr Roberts has written to the Federal Treasurer, Wayne Swan after receiving advice from Westpac that the bank would increase fees for accepting EFTPOS payments from some merchant customers.

“EFTPOS has always been the low-cost alternative to more expensive debit payments systems."

Meeting the banking expectations of Generation Y is causing the financial sector a dilemma, forcing it to offer mobile banking, online banking and in-branch banking to meet client expectations, while simultaneously fending off payments’ competition, particularly in the peer-to-peer space.

Rod Farmer, director of research and strategy for Mobile Experience, said the fact that the iPhone platform was open would make it a much bigger threat than Google Wallet, which is tied to MasterCard.

Farmer said that when devising strategies to meet the expectations of technologically savvy users it was important that banks integrate their mobile platform with their online banking system and the in-branch experience, to deliver “experience roaming”, which allows customers to “engage on one channel, continue on another and complete on yet another.”

The managing director of Eftpos Payments Australia, Bruce Mansfield, said the emerging mobile payments technology was a challenge.  Speaking at the Payments Australia conference, held in Sydney this week, Mansfield said: “The best option would be for the consumer to have one wallet on their phone, with all their payment services linked."

“But will the wallets carry all those things? Do we know if the Google wallet will be open, and what does open mean? “It could mean: ‘You can be on it, but I am always first.’ That is not open.”

Tyro Payments – which describes itself as “the merchant’s EFTPOS” – says the banks should rein in big businesses imposing excessive credit and debit card surcharging on customers.

"I think and hope that surcharging is here to stay, but a fair and transparent one… Merchants should expect from their banks safe and efficient payment and surcharging solutions,” Tyro chief executive Jost Stollmann says.
 
“Tyro is happy to provide its merchants the required technology, should the industry move towards cost-based, fair and transparent surcharging.  The disarmingly simple alternative is to eliminate or significantly reduce the interchange fee and with it the surcharging requirement.”

Jost Stollmann can’t be accredited to the opposition of PCI as he serves chief executive at Sydney’s technology firm Tyro Payments certified with PA-DSS.  In the Tyro's concept "security should be the bank’s not the merchant’s problem".

Jost is of opinion that data storage is a stage of a greater concern than data transmission. Consolidated transaction traffic with fewer data depots on the way could be a reasonable option to axe the number of fraudsters and other data hunters, considers Sydney – based expert.

"In our view, this is just increasing a fee because you can," say Jost Stollmann. "Small merchants that are exposed to competition will just have another cost increase to eat and continue struggling."

A senior figure in the payments industry has described the Reserve Bank's light-touch approach to regulation as an "abject failure" and said that the banks and card schemes had systematically refused to deliver on their promises to self-regulate. Jost Stollmann, the chief executive of payments platform provider Tyro Payments, said that the RBA needed to return to the approach of setting more prescriptive regulation for the sector and dispense with its self-described role as a reluctant regulator.

According to Stollmann, however, the payments industry holds out little hope that a workable solution will be reached any time soon under the RBA's "hands off" regulatory strategy. "It's an illusion in the Australian setting that the industry will self-regulate and become competitive and innovative. All of the major advances have come about as a result of regulatory initiatives," he said. 

"Banks are about to start charging for something they previously provided for free," said Jost Stollmann, chief executive of a rival player in the debit-card payment industry, Tyro Payments. "In fact they supplied this service for less than free: they paid 5c each time someone used Eftpos. Now EPAL has reversed that subsidy and created a new 5c fee to acquirers, which will flow through to retailers and merchants."

"A new Eftpos tax - that's what merchants and people in the industry are calling this," Mr Stollmann said.

BANKS should rein in Australian big business which imposes excessive credit and debit card surcharging on consumers, says Tyro in a submission to the Reserve Bank of Australia. Larger businesses tend to gouge customers more, particularly online, leaving them with little or no choice.

Surcharging is here to stay. Australian consumers expect fair and transparent pricing and merchants expect safe and efficient payment and surcharging solutions.

Tyro is happy to provide its merchants the required technology, should the industry move towards cost based (differential), fair and transparent surcharging.

1. Why do some Australian banks remove funds from interest bearing accounts on the date a card is first presented to the merchant, rather than the date the merchant receives the account holder's funds?
2. As the Bank(s) is holding the account holders funds in trust for merchant payment, why does the bank charge the account holder interest during the period of delay?
3. Why do some banks claim the account holders funds are the property of the bank during the delay period after the card is first presented?
...

EFTPOS debit card interchange fees increase by 10 cents to the benefit of issuer banks and to the detriment of acquirers and merchants.

Why has the RBA sanctioned what appears to be a revenue grab by the nation's biggest oligopoly?
How is such behaviour likely to enhance EFTPOS's competitiveness?
Would you consider this an unfair advantage for Woolworths and Coles?

In 2010, banks increased their fees for business by 13% to $6.9 billion.

In 2011, banks decided to increase the interchange fee for EFTPOS transactions by 10 cents, except for Coles and Woolworths.

Now, small and medium business customers of the big banks are the least satisfied of all business customers.

While the banks must decide whether they all opt into the new EFTPOS fee increase by 1 Oct 2011, a bank can choose to do the right thing and ‘break up.’

The digital economy will allow big retailers to expand their domination and further squeeze the remaining retail community. The increasing preponderance of smartphones and ever-present broadband access allows big retailers to deploy customer engagement strategies through the bundling of financial and marketing services.

Jost Stollmann calls for a vigilant regulator and competition authority and for merchants to rally behind the Tyro's, innovators providing the technology to compete with big retailers. SMEs have to lift the game and provide the shopping experience that web-centric smart consumers expect.

In 2010, banks increased their fees on business by 13% to $6.9 billion. In 2011, banks decided to increase the interchange fee for EFTPOS transactions by 10 cents, except for Coles and Woolworths. Now, small and medium business customers of the big banks are the least satisfied of all business customers.

While the banks must decide whether they all opt into the new EFTPOS fee increase by 1 Oct 2011, a bank can choose to do the right thing and ‘BREAK UP.’

The latest merchant payments research carried out by East & Partners has revealed that as well as over half of all businesses planning or actively considering applying a surcharge, the 28 percent of merchants who are currently surcharging are also applying different rates dependent on the card used in the transaction.

Surcharge incidence and rates vary not only by card type but also very significantly by merchant type (where a merchant segment has some pricing power, both incidence and rate tends to be much higher) and the payment channel involved (online merchants evidence substantially more aggressive surcharging behaviour than high street, terminal present retailers – typically twice as high.

WASHINGTON — Main Street out-muscled Wall Street on Wednesday as the Senate reaffirmed its support of limits on what banks can charge businesses for debit card transactions.

After weeks of furious lobbying and aggressive ad campaigns, retailers cheered defeat of a measure that would have forced a one-year delay and re-examination of the caps on what are known as "swipe fees." The measure needed 60 votes for passage but fell six votes short.

The lack of competition among the big four banks is slowing the development of mobile banking in Australia, IT experts say.

Foreign banks also offered customers a better banking experience because their services were better designed and they faced more competitors, NAB head of customer experience design Mark Appleford said.

The big four have had a very cozy time for quite a long time and there really isn’t a sense of competition. In Europe the reason why you get all that dynamism is the competition.

Cardholder security is too complex a topic to be left to merchants, industry figures have warned, as the deadlines for Payment Card Industry Data Security Standard (PCI DSS) compliance begin to loom for businesses that handle credit card transactions. According to Jost Stollmann, chief executive at Tyro Payments in Sydney, it is too much to ask small-to-medium-sized businesses to develop the in-house expertise required to guard against sophisticated methods of fraud and data collection.

"The banking industry is wrong, if it thinks that it can shift the burden and risk of data security and compliance to the merchant community, when even the security specialists struggle. The banks' recent efforts go into this direction and presuppose that merchants can and will become experts in SSL connection, firewalls and encryption," he said.

Jost Stollmann, chief executive of independent Eftpos provider Tyro Payments Limited, said consumers and small businesses should feel threatened by the possibilities broadband and new payment technologies give to retailers and banks.

"There is a battle on right now for control of our phones - the one thing we have with us all the time," he said. "The biggest brands and companies in the world are jostling to sit on our smart phones. If the big retailers grab control of the digital wallets of most Australians, they can grab control of more of our spending and that kind of domination can take years to unfold."

Tyro believes the banking industry is wrong, if it thinks that it can shift the burden and risk of data security and compliance to the merchant community, when even the security specialists struggle. The banks recent efforts go into this direction, and presuppose that merchants can and will become experts in SSL connection, firewalls and encryption.

 “In the banking industry, we have to recognise that cardholder security is our problem. We own it and we have to think hard about how best to protect merchants and consumers against the growing number of vulnerabilities uncovered as payments become more complex and integrated, more online and mobile”, said Jost Stollmann, CEO of Tyro Payments.

Yesterday, the PCI Data Security Council certified a breakthrough Tyro security architecture.

Tyro thinks security should be the bank’s not the merchant’s problem. Tyro’s new architecture is a great leap forward. The solution offers the speed and convenience of integrating the EFTPOS terminal and the POS software in a way that does not expose the cardholder data.

JOST STOLLMANN: One of the problems, David, is that security's actually very tough and very difficult and it's getting worse. As you see payments moving into integrated spaces into online and into mobile, we have cardholder data in many different places and they are more and more fronts of attacks.

The challenge is getting bigger because of the proliferation of payments and because payments move into the online and mobile space. I think that the marketing is well in advance on the security. 

PAYMENT processing group Tyro has warned the Productivity Commission that the increasing use of smartphones and high-speed internet will allow major retailers to increase their market dominance by using digital marketing.

In a submission to the commission's inquiry into the future of the retail sector, Tyro chief Jost Stollmann called for regulatory action to prevent major banks and retailers from selling "bundled" products, saying the arrangement was anti-competitive.

The digital economy will allow big retailers to expand their domination and further squeeze the remaining retail community.

The increasing preponderance of smartphones and ever-present broadband access allows big retailers to deploy customer engagement strategies through the bundling of financial and marketing services.

Bruce Mansfield, Managing Director of EPAL, said the business was in good shape, despite the challenges it faces. Over the next 12 to 24 months the company will upgrade its cards to be EMV-compliant and will build contactless capability.

According to EPAL’s figures, there are 21 million Eftpos cards on issue, 12 million combo debit cards (able to process payments through scheme debit or Eftpos) and five million combo credit cards.

The reality is that government, customers and merchants have moved into the internet age, while the core payment systems of the dominating major retail banks remain reliant on legacy systems that are at least 30 years old.

The large retail groups benefit from their scale that offers them significant cost advantages and - more importantly from a strategic perspective - the ability to bundle payment processes with data capture, targeted marketing, traffic generation and discounting.

There needs to be a continuous effort in detailed reform steps to secure real banking reform, said Stollmann. The playing field needs to be levelled for new players to enter this space and to build up scale. The banks have to credibly undertake to refrain from bundling and discriminatory behaviour.

It took Tyro four years to overcome most eftpos entry barriers. Tyro has introduced transparent pricing, non-stop acquiring, broadband integrated eftpos and specific solution in the health, newsagents, duty free and restaurant space. For four years, Tyro is battling the many barriers to expansion in order to build an overall market presence.

The big banks, along with Coles and Woolworths as members of EFTPOS Payments Australia Limited (EPAL) have decided on a new fee regime for EFTPOS. The new fee is an increase of 10 cents per EFTPOS transaction in interchange fee and of 1 cent in scheme fee. For transactions under $15 in value the interchange fee increase is five cents.

Through a transitional arrangement Woolworths and Coles as self-acquirers can be exempted as they may maintain the bilateral agreements they have with the big issuing banks. The threat to all other merchants is that to provide revenues to the banks, they will be slugged with higher merchant service fees on EFTPOS.

It’s time the industry lifted its game says Jost Stollmann, a former politician who after moving to Australia from Germany decided to take on the banks with Tyro, the first new Eftpos solution to emerge in 14 years. Stollmann says the issue is not about disaster recovery, but disaster avoidance.

“The settlement processes have to move from once a day overnight to multiple intra-day settlements and ultimately real-time,” says Stollmann. “This would de-risk the payment system and offer a level playing field for new entrants.”

A level playing field for new entrants? That’s not the kind of language the big four banks have responded well to in the past.

US banks began issuing cash cards in the 1970s as a tactic to automate services and cut labor costs -- more ATMs meant fewer bank tellers and check processing costs. When swipe machines were first introduced in stores, banks actually paid some merchants to accept debit cards. Later, swipes became free, and once debit cards had become ingrained in consumer culture, banks began charging merchants, and the costs keep going up.

Respected economist Robert Shapiro and analyst Jiwon Vellucci found that 56 percent of all swipe fees are passed on to consumers, raising costs for the average household by about $230 a year.

That extra $230 isn’t a burden for affluent families accustomed to paying for convenience. Still, for families living below the poverty line, that money translates into two weeks worth of groceries or the monthly heating bill.

In October last year, the Senate tasked the Senate Economics Committee to look into banking competition.
The inquiry brought claims to the surface from the banks that have a tight hold on the electronic funds transaction system. New entrants have issues with specialising in one aspect of the payments system because the banks are able to cross-subsidise, luring customers to have all their services provided by the one bank, according to a submission from Tyro Payments CEO Jost Stollmann.

It recommended that the government ask the ACCC to look into barriers to competition in the Australian payments system, with a report to be completed by 2011 on necessary legislative reforms. 

The Senate Economics Committee would like to see greater competition in the provision of payment, clearing and settlement services. Tyro welcomes the recommendation of an ACCC examination of the barriers to competition in the Australian payment and banking system.

As the only new entrant into the card payment system, Tyro identified 13 barriers to entry and expansion that need to be addressed for a more competitive and consumer-friendly payment sector.

 “Now it is all about keeping up the momentum and reducing entry and expansion barriers, one by one without delay. The enemy is the defeatist attitude. There is no silver bullet. Rebuilding a more competitive environment is hard work, let us get on with it” said Jost Stollmann, CEO of Tyro Payments.

Despite plummeting satisfaction levels amongst SME businesses across several relationship and product attributes, SMEs’ banking relationships remain stickier that ever, according to business banking research specialists East & Partners’ latest Australian SME Banking Markets report.

In April 2008 34.5 percent of SMEs said they would definitely, or it was highly likely, that they would be making a move within the next six months. Now less than 18 percent of businesses in this segment are looking to move.

“Actual conversion rates in outlook SME switching have also plummeted with a reduction from a pre-GFC average of 50 percent of customers changing all or part of their relationships to now less than 20 percent”, Mr Dowling noted.

The biggest single regulatory mechanism used to hindering competition within the banking sector is the control by the four major banks of the payments system.The Reserve Bank acknowledges the challenge that the incumbents in a payment system will have a natural tendency to keep new entrants out and often might use risk as a justification for that.

The Committee recommends that the Government direct the ACCC to conduct an examination of barriers to competition in the Australian payments system and publicly report by the end of 2011 on any legislative or other reforms that would enhance competition and efficiency in the provision of payment, clearing and settlement systems.

Computer problems that have plagued major banks in recent months have struck again, this time crippling Westpac and St George services, including ATMs, and affecting railway customers in New South Wales and Victoria.

National Australia Bank's payment system failed in mid-April, preventing hundreds of thousands of customers from receiving pay and forcing the company to open branches over the weekend.

A similar but larger problem brought NAB's system to a grinding halt at the end of 2010, infuriating customers and business owners.

In this day and age, an EFTPOS outage is unacceptable, Tyro claimed in a statement issued this morning. It went on to insist "eliminating EFTPOS failures or interruptions caused by components failure or even scheduled maintenance is not rocket science," in a clear dig to its banking rivals.

Its terminals switch over automatically between four switches in two secure data centres all running live.

For EFTPOS users there is never an impact, even when a component fails and in reality they do occasionally.

The industry has to lift its game. It is not about disaster recovery, but disaster avoidance. Modular, redundant and real-time systems, frequently upgraded, will also have problems, but they remain small and manageable.

The settlement processes have to move from once a day overnight to multiple intra-day settlements and ultimately real-time. This would de-risk the payment system and offer a level playing field for new entrants.

An technical upgrade to the nation's EFTPOS system could be the straw that breaks the camels back for some small businesses. That's according to Brett Carey who runs a newsagency in Deception Bay.

The upgrade happens in October and it mean his costs will go up by nearly $7,000.00 a year - that's the same as employing a teenager to work on Thursday nights and Saturdays.

He won't pass the extra costs on to his customers because he fears he will lose his customers to the two big supermarket chains, Coles and Woolies. And guess what? According to Brett Carey, the big supermarkets don't have to pay.

The adventure continues for a German entrepreneur taking on Australia's big banks, writes Miriam Steffens.

"Everbody said I was crazy because you cannot challenge the oligopoly", said Jost Stollmann. "It is very much in the community's interest that Tyro will be a game changer."

Tyro is now four years in operation. We are serving 4,000 merchants. We are processing $2 billion worth of transaction per year and we have about 6,000 terminals out there.

We have to make Tyro significantly more successful and I think Australia needs more Tyros. So we need to think through how we encourage, nurture more new entrants and innovators in the banking space and also in other spaces.

MasterCard today announced the launch of the „MasterCard Roadmap‟, an unprecedented five year plan to grow and reinforce the integrity of the payments system in Australia.

MasterCard‟s Divisional President Eddie Grobler said the comprehensive plan will touch every point of the payment landscape with commitments to the rollout of new MasterCard products and services, further safeguards to protect payments (both online and at the point of sale) and basic requirements on providing transparency on fees across all MasterCard payment products.

Der bargeldlose Zahlungsverkehr hat den Einzelhandel in Australien revolutioniert. Doch wenn es nach den Großbanken geht, wird dieser  gebührenfreie Service bald auch Gebühren kosten.

Jost Stollmann, der einzige  Unternehmer, der den Großbanken beim elektronischen Zahlungsverkehr Konkurrenz macht, ist empört. 

The Australian Newsagents Federation (ANF) is calling on the government and banks to reconsider what ANF Chief Executive Officer, Alf Maccioni has described as, “effectively an EFTPOS tax on consumers and small business.” He says, “The new fees announced recently by EFTPOS Payments Australia (EPAL) and proposed for October this year in the form of increased EFTPOS interchange fees will cost consumers and small business an estimated $150+ million dollars annually. The fees are effectively a new EFTPOS tax on consumers and small business.” Mr Maccioni said.

EPAL’s shareholders are made up of the major banks and large retailers Coles & Woolworths who manage their own terminals. Through a transitional arrangement, Coles and Woolworths can opt out of the new charges while the banks will receive a big increase in their EFTPOS fees to add to their already very healthy profits.

Newsagents need to gear up for a fight with the banks on the new EFTPOS fee regime.  Otherwise Coles and Woolworths will have the advantage of not having to pay the 5 cents (or more) transaction fee wel will face with the recently announced changed.

The EFTPOS fee move is all about the banks looking for other fee opportunities.  In this move, they have a fee which is difficult to understand and somewhat removed from the consumer.  By hitting some retailers (the weak and generally disorganised) and not others (the big and very organised) they are giving big businesses an unfair advantage.

"The payment space is complicated, but Tyro works tirelessly to create transparency for the media and advocate fairness for the merchant community,” said Stollmann.

“This fee regime is not aimed at making Eftpos competitive and ensuring its long term survival as claimed.” He said the new EPAL regime was about raising bank fees.

“This has the dire consequence of making Eftpos less attractive for merchants to invest in and offer to their customers. Merchants now suffer a significant competitive disadvantage compared to Woolworths and Coles. Cardholders will ultimately pay with higher prices, less competition and availability.”

Ross Greenwood speaks to Jost Stollmann CEO of Tyro Payments regarding EFTPOS Australia Payments Limited (EPAL) decision to revert and increase the EFTPOS interchange fee.

Ross Greenwood speaks to Bruce Mansfield CEO of EPAL and Russel Zimmerman from the Retailers Association regarding an increase in the EFTPOS fees.

Tyro Payments said the changes made eftpos more expensive for smaller retailers. Combined with the loss of a rebate, the fee changes represented an effective rise of 11¢ per transaction.

"The eftpos fee increase does nothing to help Australia's debit payment system to compete," the chief executive, Jost Stollmann, said. ''Now the merchants face higher costs - and cardholders, too.''

Given their large volume of transactions, Coles and Woolworths are likely to secure a better deal because they negotiate interchange fees directly with card issuers. 

EFTPOS Australia Payments Limited (EPAL) announced today EFTPOS interchange fee increases. For the nation’s leading independent EFTPOS payments provider Tyro the increase is unjustifiable and untimely in today’s banking and retail environment.

1 October 2011, Australia’s 1.2 million small businesses should expect banks to raise their merchant service fee by an average of 11 cents.

EPAL managing director Bruce Mansfield says the new interchange fee – which comes into effect on October 1 – represents a discount when compared to the 12 cents charged for debit cards, which is at the top of the RBA-regulated range for fees.

But Jost Stollman, chief executive of EPAL rival Tyro, says SMEs will be forced to cough up extra cash for EFTPOS transactions. Stollman says the fee structure is “worlds apart” from the current model, whereby businesses are provided a reverse interchange fee of -4 cents for every EFTPOS transaction.

“The difference is quite large. So the merchants will actually be charged if the transaction is above $15, which is still a significant part of the market,” he says.

PHILLIP LASKER: EFTPOS Payments Limited will lift the interchange fee for payment between the retailers' bank and the eftpos cardholder’s bank from October. Now, instead of receiving five cents for smaller transactions, the merchant's bank will get nothing.

JOST STOLLMANN, TYRO PAYMENTS: Well I don't understand very well why they decided to increase the cost of that system. It works out to nearly tripling it. To compete with the Visa and MasterCard network we make it more expensive so it's more competitive? It escapes me.

JOST STOLLMANN: I agree that we need to invest into those systems, but the investment actually comes from the acquirers and the merchants, not from the issuers.

Small businesses will be charged an interchange fee of five cents for every EFTPOS transaction valued at over $15 under a new payment scheme announced by the payment network's regulator, EPAL.

The decision has been rejected by at least one rival player in the payments industry, with Tyro chief executive Jost Stollman saying SMEs will now be forced to cough up extra cash for EFTPOS transactions.

"I think this decision confirms the fears we have expressed. We raised several issues during the consultation process, and one of those was that the fee would be raised. And now that has happened."

Ross Greenwood speaks to Jost Stollmann from Tyro Payments regarding computer banking systems. 

Eftpos Payments Australia Limited (EPAL) has welcomed the Reserve Bank of Australia (RBA) for endorsing the ongoing issuance of multi-function cards – cards carrying an international scheme's Bank Identification Number (BIN) that can also be used to initiate eftpos and ATM transactions.

“A level playing field is important, as a viable, thriving EFTPOS will provide retailers and consumers with a low-cost, efficient alternative to the expensive international scheme cards,” Mansfield said.

Mark Woodfield from Photo Barn, Burwood, brought the issue of raising EFTOPOS fees to the attention of Photo Counter, noting Tyro's activism on the matter was an example of 'small players attempting to keep the dominant market forces in check'.

'We've been a tyro merchant for several years now, and couldn't be happier with their service!' he said.

'In addition to lower transaction costs, we were able to use our internet connection (the terminal handles all the security issues) and discard the dedicated phone line for the traditional bank merchant terminal...and always happy to support an innovative company that can improve our bottom line - we're saving about $1,200 per annum ongoing.'

The Board is strongly in favour of the ongoing issuance of multi-function cards because they allow stronger competition between payment systems at the point of sale and are convenient for cardholders.

If a satisfactory solution cannot be reached in a timely fashion, the Board will consider consulting on a suitable regulatory solution.

"If EPAL reverses and increases the interchange fee, and the banks pass those increases on to the merchants, then it will hit small businesses," said Jost Stollmann

"They could eventually pass the costs on to customers by way of higher charges or withdraw from offering Eftpos altogether for smaller transactions. Mr Stollmann says many small businesses may choose not to offer Eftpos at all."

Why do big issuer banks need to consider raising the interchange bank fee and make EFTPOS more expensive? Why not just offer debit cards giving customers the choice to use either the Visa or MasterCard network or the domestic debit card network? Then the long-term future of a competitive and viable payments industry in Australia is ensured.

Tyro raises its voice for the SMEs. Every Australian should have a low cost access to his funds in his Government guaranteed bank account. Every merchant should have a low cost mean to accept card payments. The solution is today’s EFTPOS.

All the banks need to do is to maintain EFTPOS access, certainly not to make EFTPOS more expensive and less competitive. 

AUSTRALIA’s 1.2 million small businesses could be hit with significant bank fee increases, under potential changes being considered to EFTPOS fees and charges, the nation’s leading independent EFTPOS payments provider Tyro warned today.

The changes are being considered this month by the EFTPOS Australia Payments Limited (EPAL) Board. They come as Australia’s banks slash mortgage exit fees to encourage customers to switch banks, while considering changing fees for EFTPOS transactions.

Small businesses may be hit with higher fees for electronic transactions after EFTPOS Australia said yesterday it is currently negotiating with the major banks about whether the existing fee infrastructure can or should be changed.

Stollmann says these fees are fine for larger companies, but that smaller businesses are not able to negotiate their own fees and they will be forced to pay higher costs. He says smaller businesses need to be involved in the discussions.

"Whatever the decision is, I think there should be a voice and representation of merchants beyond the big retailers. There needs to be a fair and open process."

The new Eftpos payments scheme is confident that a new, though still confidential, interchange fee structure will refresh its competitiveness as a payment method for retailers – big and small – as well as for consumers.

“Contrary to some inaccurate claims made recently, we are committed to ensuring that any changes to the Eftpos proposition for merchants and consumers are carefully calibrated so that Eftpos remains the most competitive debit payment system available to Australian retailers," EPAL’s managing director, Bruce Mansfield, said in a statement.

"The major banks and the biggest retailers are in negotiations with Eftpos Payments Australia Limited to reverse and increase the Eftpos interchange fee from the current merchant-friendly average rate of minus four to four cents, [and] possibly up to plus 12 cents,” Stollmann wrote.

BIG-FOUR banks are clinging for commercial reasons to outdated batch settlement systems that delay transfers to customer accounts, a Senate competition inquiry has been told.

Tyro Payments chief executive Jost Stollmann said its web-based systems could settle credit card and eftpos payments on behalf of merchants in real time, but it was hampered by the banks' persistence with overnight processing.

The latest merchant payments research from East & Partners has found that the number of merchants surcharging their receivables transactions has risen significantly over the past five years, with over half of all businesses now planning or actively considering applying a surcharge, in part to offset merchant fees.

The depth of surcharging is also trending beyond simple recovery of Merchant Service Fees, especially with domestic online merchants.

The Federal Reserve restrictions to cap fees at 12 cents per transaction would be a victory for large merchants.

"A debit card is nothing more than a plastic cheque," said J. Craig Shearman, the vice-president of governmental affairs for the National Retail Federation. "It draws money out of the same bank account as a paper cheque, yet paper cheques clear at face value."

Small and medium businesses might end up paying $250 million more each year for accepting eftpos card payments if a new regime is pushed through.

This is a warning from a newcomer to the eftpos payment space, Tyro Payments, in its submission to a Senate inquiry into competition in the banking sector last week.

Despite a decade of payment system reform, kicked off by the Reserve Bank’s review of the Eftpos interchange regime, there are still plenty of opportunities to make the payment system infrastructure more efficient, and to remove some of the advantages enjoyed by the big banks.

Stollmann targeted the outmoded batch-processing system used to settle payments; the expensive collateral requirements of card scheme operators, and the use of cross-subsidies by big banks to keep specialists out of the market.

In the payment industry that is dominated by four issuing banks, two global schemes and two big retailers, we are a countervailing voice on behalf of the retailers. I wished I could say power.

Five years after the RBA created the access regime, we are still the only new market entrant into the core banking business.

I think that if new entrants into the banking industry are wanted to provide better outcomes for Australian businesses and Australian citizens, we have more work to do.

The big banks continue to fail their customers. Constructive industry behaviour can help reform the banking sector.

For a new market entrant the main challenges are the lack of awareness that there is choice, the unknown brand, the switching inertia of the merchant community and the inadvertent or deliberate anti-competitive behaviour of the big banks.

Every merchant giving the new entrant and his superior solution a chance gives a clear message to the major banks that there is a choice. He makes bank policy.

In a supplementary submission to the Senate Inquiry into Competition within the Australian Banking Sector, Tyro Payments has warned of a potentially major reversal of the EFTPOS interchange rate that would cost the Australian SME community in the order of a quarter of a billion dollars ($250 million) in additional transaction fees on their two billion EFTPOS debit card transaction per year.

Although the Tyro directors’ public profile helps lift the business’s profile, Stollmann says “the personality side” of putting a board together is what’s most important. “It’s about whether people have capability and integrity and whether they are up to the challenge,” he says. He also says it’s important each director brings something specific to the business.

When Jost finally settled in Australia he became involved in Tyro, a business with a special banking license that competes with the big four banks to offer EFTPOS services. This year, the business was recognised by BRW Magazine as the fourth fastest growing enterprise in Australia.

“Between bank bashing and bank lobbying, we feel that we have something to contribute. We are indeed successfully competing with the major retail banks in a core banking process. My ambition is to become a commentator on issues like innovation and competition in the banking space and entrepreneurship in general,” says Jost.

While customers and merchants have moved into the internet age and expect fast, secure, easy-to-use solution anywhere and anytime, the banking IT systems have not caught up.

The industry has to lift its game. It is not about disaster recovery, but disaster avoidance. Modular, redundant and real-time systems, frequently upgraded, will also have problems, but they remain small and manageable.