Government Sector Online Payments
Accepting Payments for the Government Sector: A Guide
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28 September 2017
RBA's new credit card payments regulation explained.
Most people reading this piece will own a credit card. With just under 17 million credit card users in Australia, the chances are that you’ll also have experience or knowledge of the surcharging that comes hand in hand with credit card usage. And if you’re a merchant, you may also be aware of the new excessive surcharging limits that the RBA (Reserve Bank of Australia) recently released and be wondering how this affects your business – and customers.
The Reserve Bank of Australia released three standards into legislation in an effort to reduce the cost of card payments to business and consumers in Australia. The legislation aims to achieve this by a few mechanisms:
The last clauses of the standards have taken effect as of the 1st September 2017. These clauses state that all merchants cannot pass on a surcharge to the consumer that is more than their cost of acceptance for each applicable card type.
In the card payments ecosystem, there are a number of parties involved in the processing of a transaction, for the sake of this post we will focus on:
When a card payment is processed, the Issuer is paid an Interchange fee set by the likes of Visa and Mastercard. The fee is a large part of what is included as part of the cost that the Acquirer charges the Merchant.
Acquirers have a range of pricing models that they typically apply to their Merchants for card payments, some of which make it difficult to determine how much it actually costs them to accept card payments. These pricing models have different interchange rates for different types of businesses, as well as varying rates depending on the type of card used to make a payment. ie. Domestic vs International cards, Debit vs Credit, and standard vs premium card types.
Acquirers are now required to clearly provide an average cost of acceptance across card schemes and card types on their statements to Merchants. The exact breakdown will be dependent on the complexity of the pricing structure that the Acquirer has with a Merchant. There will also be a table showing the annual cost of acceptance for the previous 12 months in the June statement.
If a Merchant wishes to pass on a surcharge to the consumer then they should use these tables to set surcharge rates that are no more than their cost of acceptance.
There are a couple of factors to consider here:
To meet the needs of businesses in meeting their compliance obligations, Bambora has developed proprietary functionality that allows our clients to be able to identify and apply different surcharge rates dynamically, in real time, across a range of card types in accordance with their identified cost of acceptance. This includes different card schemes, as well as Domestic vs International and Debit vs Credit vs Prepaid.
Many of our clients have complex payment needs, so this functionality has been designed to be applied across a range of payment channels and different use cases.
Our feature empowers businesses to take control by sending you a full financial overview of your payments activity. This provides powerful information on shopping trends, customer behaviour and payment preferences, which, in turn, enables you to uplift your payment experience by adapting to your consumer’s landscape.
If you’re keen to find out more about the RBA’s new legislation and how it might affect you, or more information on our surcharge feature – get in touch!
Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years, both in the UK and Australia.