Most of Australia’s two million trading businesses are small-to-medium businesses (SME) and they are the engines of employment, innovation and growth. They employ almost 70 per cent of the workforce. The Australian banking system has found it difficult to support the SME community with efficient transactional banking and funding solutions.

Tyro’s Submission to the Financial System Inquiry (FSI) comments that the Interim Report’s observation “the banking sector is competitive, albeit concentrated” is neither shared by non-bank competitors seeking access to the banking system nor by SMEs seeking competitive banking fees and access to funding.

The perimeter of regulatory oversight of payment systems needs to be extended. Systems that perform similar functions need to be regulated in the same way. Systems that functionally differ require regulation that adequately reflects the risk exposure for the banking system and the consumer. Such a graduated approach would establish light, but early oversight of new emerging systems like stored-value solutions or cryptographic currencies.

A ban on interchange fees would eliminate discriminatory pricing penalising SMEs and the pressure to pass on these costs via controversial surcharging. New Zealand and Canada have mandated EFTPOS debit card interchange fee at zero. The EU set cross-border interchange fees at 20bps for debit transactions and at 30bps for credit transactions.

Despite the recent hype around new technology players, providing new consumer experiences at the periphery of banking, the contestability of core banking services and access to the Australians’ deposit continues to be weak. Tyro is locked out of competing for businesses with a bank relationship manager, because the dominant retail banks engage in tactics such as cross-subsidising, product bundling, packaging and cluster-pricing.

A bank culture of “what one can get away with” stifles effectively innovation and competition, leaving the affected competitors without recourse. The pattern of anti-competitive behaviour seems to be below a level causing action by the ACCC. Tyro recommends to heighten the threat of penalty significantly by introducing the concept of triple damages. This would increase the risk perception and improve the competitive culture.