Mr HUSIC (Chifley) (20:46): It gives me great pleasure to speak on this bill. The opposition welcomes this bill. The financial system inquiry looked at this issue in great detail. When it brought down its report, in November 2014, it took a strong stand on surcharging. It recommended that surcharging regulation be introduced and that its application be expanded to ensure that customers using lower cost payment methods would not be overcharged, or surcharged, by allowing more prescriptive limits on this practice. The final report of the inquiry was released in 2014. It was disappointing that it took over a year to get a response to it—in particular, the kinds of things we are discussing in this bill. Having said that, this is a largely common-sense and, in our view, non-controversial recommendation. It will ensure that Australians are not ripped off when using credit cards and it will increase the efficiency of the payments system. It should clarify regulation, enhance competitive neutrality between system providers, improve the efficiency and effectiveness of price signals and reduce the potential for cross-subsidisation between consumers and merchants. The opposition welcomes these aspects.
The issue of payments is fast evolving, and a number of speakers today have reflected on that. There is no doubt that an electronic payment system is good for consumers, merchants and the broader economy. I note the presence in the chamber of the Assistant Minister for Innovation. He and I know that in dealing with start-ups in particular, which are innovating and bringing in new methods of getting things done in this country—liberalising the way the economy works—an efficient payment system is the oil that make sure the wheels of commerce turns smoothly. And being able to adopt those practices and embed them within the systems that are being used by start-ups, which do through the service that they offer have a payments component to them, works efficiently. It is important in reducing costs, in reducing the management and handling of cash and in helping tackle the black economy. Studies have said that the more an electronic payment system is embraced the better it is for an economy and they can see commercial benefits.
I have taken a great interest in this space, and it is important that we do whatever we can to encourage a greater embrace of this. The reason I reflect on this point is that surcharging dents people’s confidence in the system. If people believe that electronic payments are just an easy way for someone to take a bigger clip from the ticket on the way through, if they think multiple transactions on a credit card will lead to higher charges, they will resort to cash. So there has been concern for some time that people will be ripped off. They also have a concern that different types of credit cards—be it American Express, MasterCard or Visa—have different surcharge regimes. There was a practice occurring—and people would witness it when they were at the point of sale—of blending. Instead of having the proper pass-through of the charge itself, the cost would be blended and this would actually inflate the cost on individual credit cards. This is a big concern.
I have spent time with most of the credit card players. I have visited Visa and seen their innovation centre in San Francisco. Here in Australia I have spoken with MasterCard. And I have an American Express card as well—as I suspect a number of us here do. So I have experienced all three, and I know the concerns that drive consumers mad when they see those practices occurring. We simply cannot afford to have this continue. That is why it is important that this bill, and the recommendations of the FSI, be given further legs and that we amend the act to include a ban on surcharging itself, allowing the ACCC to take action against corporations and other specified under section 6(2E)of the act that engage in excessive surcharging. A surcharge will be deemed to be excessive if—and only if—the surcharge exceeds the level of surcharging permitted under either a Reserve Bank standard, which covers the kind of payment, or as set out in the regulations. For example, a Reserve Bank standard refers to some fixed amount for a particular payment method or to a specific range of input costs. The amount of the payment surcharge cannot exceed the amount stated or calculated as the permitted surcharge. So there are some good changes there.
When people think of credit cards, they think of the small plastic that sits inside their wallet or purse. In actual fact, there is a rapid evolution occurring right before our eyes where, for example, smartphones themselves can be used as a method of conducting transactions. I am a very big fan of Apple Pay, because of the ease of the system—being able to use that at a point-of-sale terminal, conducting a transaction without even having to reach for a credit card. When you undertake that process, even tellers are amazed at the ease at which that transaction can be conducted. And that is the point: it should be easy and it should be secure. Under the Apple Pay system, you use your thumbprint and a highly individualised mechanism for verifying a payment before proceeding. Being able to use a thumbprint has now allowed people to be able to lift the amount that they can spend through that method. For example, with the type of credit limits that exist on Paywave, people can only conduct a transaction of up to $100 value before going through some verification method, which is usually a pin, because the card companies themselves have moved to a pin-based verification system.
At the consumer electronics show in Las Vegas this year, there was also an announcement by Samsung that this year, through arrangements they have made with two banks, they would be introducing—on the Android platform, quite distinct from iPhone—Samsung Pay to Australia. In fact, Android has been working furiously. From what I understand, it has been able to secure agreement with the big four banks to introduce Android Pay in the first half of this year. However, you can only access Apple Pay through American Express and American Express does, as people well know, charge a higher surcharge. The reason why I mention this is that there has been a delay in introducing this mechanism of payment through smartphones.
The use of mobile technology is taking off exponentially—it is the platform in which broadband-enabled apps are able to undertake a whole range of activities, not the least of which being payments. What has occurred is that Apple and the major banks have been in a major arm wrestle, refusing to agree and cede ground in establishing those payment arrangements that would allow for Apple Pay to be broader than just the AMEX platform. This is something that I have raised in public domains over the last six months and it is something that I am greatly concerned about. I believe, a lot of us believe and the assistant minister believes that the smoother that the payment system is, the more that it is on an electronic platform or a mobile platform, the better it is for a whole host of people—consumers, merchants and the broader economy. This needs to occur.
In the case of Apple, they have, not surprisingly, sought to extract the maximum gain that they can, and the banks have not been willing to cede that. We certainly do need to see a better approach on that system, but it is heartening to see that they have been prepared, in the case of Android, Samsung Pay and other systems that use Android, to cede ground and achieve some movement on that. My bigger concern, longer term, is that it takes too long to get these payment systems in place. The concern there is that the longer it takes, the more frustrating it is for consumers unable to access much more efficient platforms for payment. Certainly, we do not want to see a reversion back to cash. While people do use cash—and I know that there will be traditionalists that hold onto it—there is definitely something to be said about seeing the lower costs flow through for merchants and consumers.
The other obvious concern in all of this is that we do not have an efficient system that ensures a more secure platform. We know that can be the case by moving to this system of payment and so that is certainly one of the things that I have been keen to see. I would definitely be urging the major banks to see what they can do in furthering talks with Apple and others to ensure that these systems are brought into place quickly and that they are much more responsive.
We know that Australians have an appetite to embrace mobile technology a lot faster than most other parts of the world and, in actual fact, we have a tendency to talk ourselves down relative to others. In the US financial system, what is surprising for any Australian visiting and making transactions in that system is the dominance of a cheque-based payment system, which is insane. There is still a paper-based, cheque-based system in place in the US. Paywave was embraced so rapidly here—in fact, it was in the top four markets in the world. There was nowhere that it was embraced as quickly as four markets, of which Australia was one, from what I have been briefed on. Australians do embrace this quickly, but, if you go to the US system, in many instances it is still a cheque-based system. You can imagine, in a country with 250 million people, with the multiple transactions that are undertaken in that economy, to still be reliant on that system instead of an electronic payment system beggars belief.
From our point of view, knowing that Australians are much more willing to use mobile technology, and new payment systems and mechanisms, and knowing that there is a definite appetite and hunger to see this movement occur quickly, for banks and some of the big tech players like Apple to be stuck in a quibble, in an arm wrestle, in the way that they have, where consumers have lost out or been forced to pay higher surcharges as a result, makes no sense to me. The quicker we get this resolved, the better.
But, again, while we might be talking about the new world, while we might be talking about new payment systems, we are still arguing about an old-world mentality that seeks to squeeze as much out of the consumer as possible, through fees. It is the type of thing that we are trying to stamp out under this legislation: a mindset that would try to squeeze extra out of consumers through excessive surcharging. It is simply unacceptable.
Certainly, while I welcome the developments that will emerge out of this legislation and the fact that it will put heat on people who want to engage in excessive surcharging, we still have other fights that we need to undertake and those fights need to ensure that faster embrace of electronic payment systems occurs, and we hope that proceeds into the future.