Tyro Payments lodged a submission to the Reserve Bank of Australia’s Dual-Network Cards and Mobile Wallet Technology Consultation claiming that it is in the public interest to see the Australian domestic debit card system survive so as to maintain competitive tension between schemes, as well as to give merchants and consumers choice.
Dual-network cards are debit/ATM cards that can be routed through different networks, the domestic eftpos network or one of the two global networks, MasterCard and Visa. With the establishment of eftpos Payments Australia, the eftpos system has started to catch up with the technology of the global schemes investing into a modern hub network as well as contact-less, mobile and online acceptance. But despite these investments and more than 20 million eftpos dual network cards on issue as of mid-2015, the domestic debit card system has been declining under the competitive pressure of the global schemes and will continue to do so, unless a strong regulatory intervention can establish a level playing field.
The global schemes have mandated to the issuer banks that their own network has to be the first priority in network selection. When a cardholder uses the dual-network contact-less card for a transaction, the EFTPOS terminal automatically routes the transaction through the global network. The consequence is that for the high volume of contact-less transactions, any choice for the merchant or the consumer is de facto removed. The technical specifications are written in a way that makes it impossible for an acquirer like Tyro to offer merchants a possibility to overwrite the mandated network priority. Merchants have to bear higher costs or they recoup those from the consumer through surcharging.
Mobile wallets are a relatively new technology in the Australian marketplace. There is now an opportunity to make sure that there are no mandates or technical specifications removing choice from merchants and cardholders. For it to be delivered effectively, a clear regulatory mandate and standard is required that enforces:
- Automatic congruent provisioning of both networks for dual-network and combo cards through the third-party wallet provider or the bank issuer.
- Preserving user experience, allowing cardholders to always see network options and easily switch transaction-by-transaction or per default settings with their network choice.
- Transmitting the network choice to the EFTPOS terminal and support an option to override a cardholder choice to allow low-cost routing.
If such a regulatory mandate does not eventuate, we again face the lockout that we experienced in contact-less transactions. This step in the process is critical, since the reality is that only the merchant has the skill and potentially the EFTPOS terminal technology that can reduce transaction cost and avoid surcharging to the benefit of himself and his customer. Tyro would implement the routing technology if it were enabled by the technical specification and not excluded by a scheme mandate. The move to mobile wallet technology is the last opportunity to recover from the effect that the lockout in the contact-less card transaction space has had on the eftpos scheme.
Other international jurisdictions have moved to regulatory intervention to improve network choice or priority for the domestic debit card system. The Reserve Bank of Australia’s prior approach of voluntary undertakings has failed in the contact-less payment transaction space. Only a regulatory intervention will ensure that such a failure is not reoccurring in the mobile payment space.