03 Dec 2007
Andrew Cornell, The Australian Financial Review
Seated alphabetically in a huge square, delegates at last week’s Reserve Bank of Australia/Melbourne Business School payments conference appeared to be participating in some grand peace plan. But it was appearance only.
If nothing else, the Payments System Review Conference confirmed that, left to their own devices, these players in the Australian payments system would have as much chance of coming to a compromise as Collingwood and Carlton fans.
If there was any doubt of necessity for an umpire, even a reluctant one as the RBA describes itself, this conference should have dispelled it. Apart from wanting to unravel all the reforms, or at least those they didn’t agree with, the only other thing the retailers, banks, payment schemes, consultants and economists could agree upon was that it would be good if we didn’t have to start from here. As one delegate, Manuel Garcia of Indue, a consultant to smaller financial institutions, said: “We have tried the path of self-regulation over the last five years and, if we are honest with ourselves, we have failed to self- regulate”.
“While this should not be a reason to rule out self-regulation in the future, the lessons from the last five years suggest that where we have failed is in our pursuit to secure unanimous consent to change”.
The RBA also received wholehearted support from new participants in the payments system, who argued they would have never got a look in were it not for the neutral umpire. Or at least an umpire whose idealogical bias was different to all the other interested parties. Looking at the fractious history of ATM reform- five years and concluded only after thinly veiled threats of imposed regulation from the RBA- and Eftpos access, it’s impossible to conclude otherwise. Another delegate, a foreign observer, noted this experience is far from an Australian idiosyncrasy- and indeed in complex systems with entrenched vested interests “induced self-regulation” may be the ideal system of governance. To listen to the MCoys and Hatfields grind out their old grudges, one couldn’t help but develop a soft spot for interventionist central bankers. The retailers, happy to take fees but allergic to paying them, may scoff at the admittedly spongy argument from the banking and payments scheme side that fee revenue promotes innovation, but Australian retailing is hardly the world’s most innovative.
One need only listen to the views of Westfarmers’ retail guru Archie Norman that the Australian shopper is short- changed- or indeed visit a few shops in Tokyo or a supermarket in Europe. The retailers make the simple claim they should be able to choose which cards they accept and how much they charge for them. Yet they don’t want to surcharge, as they know customers like using the cards. Whilst it is true that the first to suffer if Woolworths decides not only to accept some MasterCard and or Visa cards and not others will be Visa or MasterCard- it is naïve to think introducing such uncertainty won’t ultimately come back to bite them. Particularly when the academic research, rudimentary as it is, suggests there are real benefits to all parties from higher interchange fees where a consumer would not otherwise have the funds to buy a product the retailer is offering.
Australia once boasted one of the most innovative payment landscapes in the world. I’m not quite old enough to have reported on the launch of Bankcard, but I do remember Eftpos, universal ATM acceptance and the world’s first stored- value card trials.
Today Austrlia leads the world in just one area of payments innovation: regulation. Or :”intervention”. The RBA is a world leader and, as many of the economists noted, they are to be thanked for delivering a fascinating laboratory experiment for the rest of the world to study. Prompting one American to express the view, “I feel like I’m a Petri dish”.
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