The word “Australia” is often invoked during the current U.S. interchange debate, and with good reason. With a large economy and a sophisticated payment industry, it illustrates the potential unintended consequences of the price controls proposed by the Durbin Amendment.
About 6 months ago (late November), the New York Times actually did an in-depth review of the impact of credit card regulation and price controls in Australia titled “U.S. Looks to Australia on Credit Card Fees” (although we here at Visa were admittedly partial to the story’s original headline online “Australian Credit Card Fee Curbs Backfired” featured in the graphic below).
As the NYT article clearly shows, a major unintended consequence of Australia’s regulatory actions is that many “merchants are now imposing surcharges for each credit card transaction, even though fees the merchants pay card companies have fallen steeply.” Also worth reading is an article by a local Sydney paper covering how the Australian Consumers Association (Choice) “awarded” a major national airline for the worst consumer initiative of the year for ‘excessive surcharging’.
But did consumers benefit? According to the Reserve Bank of Australia, there is “no concrete” evidence that merchants passed the interchange savings on to consumers. Furthermore, the US Government Accountability Office (GAO) noted that since Australia’s regulators implemented the regulatory changes, “there is no conclusive evidence that lower interchange fees led merchants to reduce retail prices for goods; further, some costs for card users, such as annual and other fees, have increased.”
Posted by: Will Valentine, Visa Corporate Relations on June 18, 2010 at 1:07 pm
