Visa undertakes to address competition concerns over debit card payments

The ACCC has accepted a court-enforceable undertaking from Visa AP (Australia) Pty Ltd and Visa Worldwide Pte Limited (together, Visa) in relation to concerns that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants.

“The ACCC was concerned that Visa’s strong market position in the credit card acceptance market could be leveraged to limit competition in the debit card acceptance market by tying the offer of cheaper strategic merchant rates for credit card transactions to a commitment from the merchant to process Visa branded dual network debit card transactions via the Visa network and not through eftpos,” ACCC Chair Rod Sims said.

“Visa credit cards are a ‘must have’ form of payment for many Australian merchants.”

Since 2017, merchants have been able to choose whether contactless payments made using a Visa branded dual-network debit card are processed by Visa or eftpos.

“The ACCC was concerned that Visa’s dealings with merchants could influence their choice of debit card network, and diminish competition between Visa and eftpos in relation to debit card acceptance,” Mr Sims said.

In its undertaking, Visa acknowledged the ACCC’s concerns but made no admissions of any breach of the competition laws.

“Visa’s undertaking means that it cannot offer strategic merchant rates for credit card payments to merchants on condition that the merchant processes debit card payments through the Visa network,” Mr Sims said.

The undertaking also ensures that merchants can make decisions about which debit card network processes Visa branded dual-network debit card payments without Visa increasing the cost of processing their Visa credit cards payments as a consequence.

“Australian consumers use debit cards every day when buying goods or services, and COVID-19 has accelerated the transition from cash to card payments. With this in mind, the importance of competition in card acceptance markets is vital to both merchants and consumers alike,” Mr Sims said.

“This undertaking is an important step to ensuring that Visa and other debit card network providers are able to compete on their merits to provide debit card acceptance services to merchants.”

More information on the undertaking can be found here: Visa AP (Australia) Pty Limited and Visa Worldwide Pte Limited

Background:

The ACCC investigated allegations that Visa may have engaged in anti-competitive conduct, by offering certain large merchants cheaper interchange rates (known as ‘strategic merchant rates’) for processing credit card payments if they agreed to process Visa branded dual-network debit card payments through the Visa network.

Visa debit cards and credit cards are accepted by a significant proportion of merchants across Australia. Almost all Visa debit cards are dual-network debit cards that can be processed using either the Visa or eftpos debit card network, Australia’s domestic debit card network.

When a consumer uses a debit or credit card to pay for goods or services, the merchant incurs fees as a result of accepting the payment. This fee will depend on what is called the ‘interchange rate’ that is set by a card scheme.

For dual-network debit card payments, the fees paid by a merchant can vary depending on the debit card network used for processing the transaction.

Since 2017, the Reserve Bank of Australia has supported merchants having the ability to choose which debit card network processes their contactless (i.e. ‘tap and go’) dual network debit card payments. This initiative promoted by the Reserve Bank of Australia is referred to as ‘merchant choice routing’ or ‘least-cost routing’ and is intended to improve competition in the debit card market and reduce the costs associated with processing debit card payments.

The Reserve Bank of Australia is conducting a Review of Retail Payments Regulation, which among other issues is considering competition and efficiency in the debit card market and potential regulation relating to the processing of dual-network debit card payments and least cost routing.

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