The RBA has once again cut down charges that banks claim on each other to process transactions done by credit card, reflecting lower costs with schemes associated with main cards.
RBA stated that credit card transaction fees charged among banks for processing interchange transactions would come down to 50 percent from 55 percent. This will be applicable from 1 November 2006 for the coming 3 years.
RBA started these sweeping revisions back in 2003, when a cost formula developed by it saw a huge decline in interchange transaction fees from 95 percent to 55 percent. RBA will again calculate the cost base in 2006. Also, RBA has altered the interchange transaction fee system for debit cards in order to reflect lower costs.
The Central bank said in April that fees for debit cards would decline to 15 percent from 40 percent on each transaction. However, debit cards would see a cut down from 44 percent to 15 percent from November in coming three years. RBA admitted that the figure is a bit lower than what was published few months ago, reflecting lower authorization and processing costs.
A Visa spokesperson admitted that this RBA announcement was on similar lines on what it said in April and also said that Visa would be consulting its members on this.
"This move will probably receive a huge criticism from banks as they gain a lot on such transactions. It may even encourage banks to abandon customer friendly schemes like reward points and considerably cut zero-interest periods", said a RNCOS analyst.
However, things may worsen further for banks. RBA said in May that it might abolish interchange transaction fees for both debit & credit cards.
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