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 face competing in an even less balanced playing field.
We need to ask why the big bangs have worked together to create a fee increase which is certain to hit small businesses but not Coles and Woolworths.
Tyro, the broadband EFTPOS payments company used by more than 700 newsagents, has published a press release which goes into more details on this. Click here to access to press release.
Newsagents need to ask their banks about their role in this fee increase and whether the higher interchange fee will flow to fees we pay.
NAB is spending a lot of money saying that they have broken up with other banks. On this issue, they have not.
What gets lost in a lot of the talk about EFTPOS fees is that both Coles and Woolworths have major investments in this space (as in their own transactional facilities).
Without these, the price increases would have had to have come long ago as the EFTPOS network struggled to keep up with the sheer number of transactions that the likes of both companies process on a daily basis.
You cant begrudge them the fact that they deserve to gain some sort of advantage of having their own systems.
That said, I think it is a bit rich (pardon the pun) for them to buck the trend (especially Woolworths, who had the audacity to complain that the cost of processing credit transactions on Debit Visa/Mastercard was causing some level of financial pressure on the company).
The reality is that we now live in a user-pays environment – if we want the convienience, it must be paid for, and in many instances I agree with this.
Frank, that is true, they do have their own infrastructure. That does not mean they should have a seat at the table which determines the basis for fees other businesses will pay.
Coles and Woolworths need to be reined in. We ought to lobby politicians on this as it is a political issue.
Mark – I dont necessarily agree that they should not have a seat at the table, they are a major stakeholder in the industry.
It is a long bow to draw to say that both Coles and Woolworths have any great impact in the decision – the other members were very quick to introduce user fees on the likes of ATMs when the fees were deregulated last year.
All of the parties (not just C/W) involved with EPAL have a vested interest, remember that EPAL is effectively an industry group.
Government intervention in these matters is always dangerous – we want a free and open economy, but you cannot run to the government every time that those parameters change.
Frank,
Coles/Woolworths are a stakeholder in their own facilities. They are not a stakeholder in the part of the industry that sells access to the EFTPOS network.
The situation would be similar to the wholesale arm of Telstra being allowed to charge whatever they wanted for their retail competitors to access their copper cable network.
One of the basic ideas on which Australian competition legislation is based is the notion that one competitor should not be allowed to abuse their market power to the detriment of the consumer. In this case Coles/Woolworths are being permitted to play a part in determining the expenses incurred by their competitors, directly as a result of their market power.
Government intervention happens all the time. It is certainly not dangerous and in terms of competition law, often helps achieve a well-balanced, sustainable marketplace.
It is also important to note that regulation is often important in markets where competition is limited or doesn’t exist. Where an industry body is able to arbitrarily set fees and no other reasonable alternative exists, customers should be protected from the distorted power of such a monopoly.
Frank, my suggestion that this is a policy matter for government is not a change for them for EPAL was created out of government action through the Reserve Bank.
I content that they got the make up of EPAL wrong.
On the broader issue of Coles and Woolworths, taking all hats off and speaking only as a consumer, these two have too much market power – so much so that it bad for Australia.
When are these new fees happening or are they already in .