PAYMENTS SYSTEM BOARD
REVIEW OF CARD PAYMENTS REGULATION
CONSULTATION PROCESS
FEBUUARY 2016
Submission from Christopher Zinn
Consumer advocate
&
Founder - Determined Consumer
BACKGROUND
Determined Consumer is an initiative designed to drive consumers to
engage with, and benefit from, the consumer empowerment revolution.
Technology is arming consumers with information, the ability to aggregate their demand
and direct influential channels to producers.
We believe keeping the consumer revolution on track needs the attention, action and
aggregation of those who are determined to share in the work and drive pro-consumer
change..
I work in the emerging marketplace of consumer empowerment such as groups increasing
their bargaining power as in the Big Electricity Switch of 2012 which attracted 250,000
households. Such movements can drive pro-consumer change in markets faster and
arguably better than regulation.
The concept is described as the coming of Next Generation Intermediaries offering better
market engagement and better outcomes for consumers for less effort
http://www.consumerfutures.org.uk/files/2014/01/Next-Generation-Intermediaries.pdf
I am currently working towards this goal with new wave consumer groups, which are also
social businesses, such as The Fifty Up Club a venture for older Australians from One Big
Switch.
I’ve been part of a campaign called Get Credit Score to empower consumers by giving them
back data about their perceived credit worthiness.
I also consult with a number of businesses especially start ups, particularly in the FinTech
(financial technology) area to sharpen their consumer focus.
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INTERCHANGE FEES
The purpose of my submission, which I make as an individual with some track record as a
consumer advocate with an interest in payment systems, is to argue for a broader definition
of the ‘consumer interest’ and where it lies.
I restrict my comments to the interchange issue and applaud the moves to finally crackdown
on opportunistic credit card surcharges; especially the pernicious practice of charging fixed
fees as opposed to fairer percentage amounts.
Maintaining the current system for interchange will, in my view, benefit the majority of
consumers. However there is uncertainty as to how long this may last given the PSB’s stated
view that does not recognise the value interchange provides to consumers.
The risks of regulation through any further moves to lower the IC rate include:

Restricting consumer access to and benefit from credit card services which are
funded via IC including fraud protection, chargeback and interest-free periods.

Higher costs to consumers through banks shifting the costs of lower IC income to
their customers by raising annual fees and other charges.

Merchants failing, despite various predictions from pundits, which have proved
impossible to evaluate, to pass on any cost savings through lower IC in the form of
lower prices.

The smaller banks, credit unions and financial institutions, which are far more
exposed to lower income from any regulation of IC, may be curtailed from offering
their current lower rate credit cards

A consequence of the ‘reductions in the generosity of rewards programs’, to use the
words of the PSB could extend beyond premium and companion cards and impact
competition in a market which needs more of it and not less.
While some of the consumer movement in Australia have consistently supported RBA
regulation of interchange fees this view is not universally held.
Overseas and particularly in the UK it’s been argued the benefits of unregulated interchange
to consumers in terms of fraud protection, chargeback and even loyalty schemes
stimulating competition far exceed any costs imposed by unregulated IC.
In the United Kingdom consumer bodies, (including the Centre for Responsible Credit, Money
Advice Trust, The Money Charity, Christians Against Poverty and the influential
Moneysavingexpert.com) issued the following joint statement on their concerns about the
European Commission’s bid to regulate interchange in 2013.
http://www.parliament.uk/documents/commons-committees/europeanscrutiny/Consumerbodies.pdf
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To extract some key points from their statement:
As UK consumer bodies we have serious concerns that there may be considerable unintended
consequences and significant detrimental effects of proposed changes in interchange
regulations on card transactions.
As groups representing consumers in the UK, we are concerned that the Commission’s
proposals will result in less competition in the market, thereby punishing both ‘savvy
shoppers’ and more vulnerable consumers through restricting access to credit, limiting its
flexibility and increasing its cost.
The PSB paper suggests the 2003 regulation of interchange was an unqualified benefit to
consumers and that the worst predications of the industry did not come to pass.
There is however considerable evidence, as outlined in my submission to the 2015 Senate
Inquiry into interchange and other credit card fees, that merchants failed to pass on any
definable or recognisable material savings they made in lower IC costs in the form of lower
prices.
In addition there is also evidence the banks made up for the lower IC fees by increasing their
annual fees and charges to card holders.
(You can access my original submission #28
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Credit_Car
d_Interest/Submissions )
In questions and answers 8 and 9 of the document http://www.rba.gov.au/payments-andinfrastructure/resources/qa/card-payments-regulation.html it’s also claimed:
It is also possible that there may be some adjustment in annual fees on these cards
…the reforms should place downward pressure on the prices of goods and services faced by
all consumers.
The PSB has made the right call so far on what all sides admit is a complex issue. It now
needs to make a more longterm commitment to ensure average consumers are not
impacted by intentions to regulate interchange.
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RECOMMENDATIONS
The Payments System Board should:
1. Make a long-term commitment to maintaining the current interchange system
given the significant risks of regulation and the benefits interchange can provide
Australian consumers.
2. Be mindful of the effects of regulation overseas: expert testimony and analysis on
the impacts on consumers of regulating interchange fees in other countries should
form a key part of the consultation process.
3. Consider the interests of those who use and accrue points and the role of such
schemes in driving and not inhibiting competition.
4. Foster policies which encourage innovation and competition in the payments
system by not unduly reducing the incentives for new players to enter the market.
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