Josh Frydenberg has called on regulators to get banks to loosen their grip on the payment services market and limit the fees small businesses face as buyers go digital.
The post-COVID world is expected to be dominated by debit cards, mobile apps, and e-commerce.
The push to increase the use of low-cost debit cards and drive buyers away from credit cards will help, the treasurer said in a letter to the Payments System Board obtained by the AAP.
He warns that fees and other charges imposed by banks and global credit card merchants will increase without regulatory changes that increase competition in the payment services market.
The treasurer wants the Reserve Bank and the Australian Prudential Regulation Authority to push banks to offer customers only so-called “dual-network” cards, instead of more expensive cards only linked to a credit card company.
Dual-network debit cards allow transactions to be routed through different networks, including the dominant eftpos network and the MasterCard or Visa networks.
“Recognizing the essential role of dual-network debit cards in facilitating low-cost delivery, the government strongly encourages the board of directors to consider making their issuance mandatory for large and medium-sized financial institutions,” the letter said.
Many small businesses with high-value and low-value products, such as coffee and take-out, face average payment costs that account for over 1.5% of transaction value.
“These costs have a disproportionate impact on the small and medium-sized enterprises which are least able to absorb them. For this reason, the government strongly supports least-cost delivery,” said the treasurer.
The small business lobby group COSBOA has repeatedly warned that the current system is flawed.
Whether a consumer taps their debit card, waves their smartphone, or enters their card details online, the small business owner should be charged the lowest fees and continue to run their business, said Alexi Boyd , head of COSBOA.
Eftpos chief Stephen Benton said the move would mean traders could avoid the generally higher fees charged by international programs and potentially save hundreds of millions of dollars each year.
But this kind of debit card competition is currently not available on platforms like mobile and e-commerce, he warned.
Contactless payments such as tap-and-go mobile payments typically go through the more expensive Visa or Mastercard networks.