Breaking: RBA Announcement on Digital Wallet Routing Paves The Way For $800m in Annual Savings
In a market-leading move, the Reserve Bank of Australia has announced that it expects the payments industry to develop least-cost debit routing on mobile wallet transactions.
The announcement comes at a pivotal time as Australian digital wallet usage more than doubled last year, accounting for over $2.1 billion AUD of transactions in March 2021 alone.¹
This comes as groundbreaking news to retailers, who have previously raised concerns surrounding the inability to undertake LCR on transactions processed through digital wallets.² Currently, merchants cannot access Australia’s domestic debit network, Eftpos, on payments made via digital wallets unless the customer alters their default network in-app.
More to Come from Least Cost Routing
If extended to all debit transactions, CMSPI estimates that LCR, which is currently limited to contactless domestic debit card transactions not processed via a mobile wallet, could save Australian merchants an estimated $800 million annually.³
What’s Next for Merchants?
The RBA has indicated it intends to consult the industry regarding the approach and timeline to best meet the expectation around digital wallets, stating that the implementation of these solutions would be “more feasible and less costly than previously indicated”.⁴
But benefits to merchants aren’t guaranteed. Between strategic rates, technical limitations, and negotiation dynamics, accessing the full benefit of LCR is incredibly complex, and we regularly see inefficiencies in merchants’ LCR systems. With our data-driven analysis, CMSPI works with Australian merchants to assess and optimize their LCR strategy and to supercharge their payments performance.
Sources:
+Reserve Bank of Australia Confirms Least Cost Routing Could Reduce Merchant Debit Costs by 20%
Claims Filing Deadline May 31st Fast Approaching in Payment Card Interchange Settlement: Monetary Award of $5.54 to $6.24 Billion Available to Merchants
In December 2019, the Courts approved a monetary award in U.S. antitrust litigation between merchant Plaintiffs and Visa, Mastercard, and large U.S. bank Defendants. Merchants interested in claiming settlement payments must file claims no later than May 31, 2024. This settlement opportunity is distinct from the March 2024 proposed injunctive relief settlement.
Assessing the Proposed Visa and Mastercard Settlement in the Context of Recent Fee Increases
In March, a proposed settlement for U.S. merchants accepting Visa and Mastercard card transactions was released, representing a major milestone in a nearly two-decade class action lawsuit. The proposed settlement would require the networks to introduce 4 and 7 basis point decreases to published and average domestic credit interchange fees, respectively, but how do these decreases compare to recent fee increases for U.S. retailers?
Ecommerce Battlegrounds: Fortifying Your Online Revenue Against Fraudulent Refunds and Chargebacks
In an era where digital transactions form the backbone of global commerce, protecting online revenues against online fraud is more important than ever. The latest data from the Nilson report reveals a concerning trend: the U.S., despite making up only a quarter of global card volume, accounted for nearly half of the world’s total card fraud losses in 2022, amounting to a staggering $13.61 billion in lost revenue. 1