Retailers ask for controls on bank cards

Press, 19 June 1979, Page 14

Retailers ask for controls on bank cards

PA Wellington The Retailers’ Federation wants an advisory council established to compile a voluntary code of practice on bank cards and electronic fund transfers. The federation told the Commerce Commission yesterday that an advisory council should include bank, consumer, and retailer representatives.

As well as producing a voluntary code of practice, a council should be required to monitor the growth of bank card and electronic fund transfer schemes, the federation said. It urged the commission to recommend to the Government that an advisory council be established. The federation was presenting submissions on the third day of the commis-

sion’s Visa Card inquiry. The inquiry is expected to last two weeks. It will determine whether Visa Card and other bank cards should be examined as possibly contrary to the public interest, and whether the trade practices provision of the Commerce Act should be changed. The inquiry follows adverse public and retailer reaction after the Bank of New Zealand introduced its Visa Card last October. The Retailers’ Federation secretary (Mr T. A. Currie), submitted that banks had failed to demonstrate benefits outweighing the detrimental aspects of bank cards.

Bank cards were more expensive to merchants than cash, cheques or in-store credit, and would not reduce clerical and administrative costs in stores, he said.

Bank credit cards would release additional credit, which would be contrary to the Government’s intentions. Mr Currie said the federation believed merchants ultimately would increase their margins to recover the cost of bank card transactions.

New Zealand retailers worked on a narrow profit margin which would not cover “the share of banking costs” passed on by the issuers of bank cards. The overwhelming evidence from overseas was that regulations were required to control bank cards, electronic fund transfer sysand other pavment systems.

If a substantial volume of retail trade was done using bank cards, the retail industry was particularly vulnerable to fiscal and monetary controls.

The federation submitted that the problems of “access, to credit” would be exaggerated if retailers transacted a significant volume of business by bank cards, he said.! During any credit squeeze, a' retailei would become even! further dependent on the banks’ capacity to maintain credit lines to card-holders. It was reasonable to suggest that bank cards in New Zealand, without safeguards to tetailers and consumers, could achieve a greater penetration than anywhere in the world, Mr Currie said. | The Retailers’ Federation! itad consistently objected to! jthe merchant’s fee for bank! card transactions being cal-1 dilated as a commission. “While the banks may; suggest that the retail! trades’ opposition to a com-i mission based fee is ill-!

lifounded, a retailer must be Jsomewhat mystified when hei [compares the costs for an ij individual transaction for; say 8500," he said. .I “If the transaction was by| J way of cheque the cost iwould be 3c, if by way of: ■ direct debit 10c, but if the! transaction was made by! way of bank card $15.” i A flat fee would overcome) much of the retailer sector’s! criticism towards bank cards. Mr Currie said. The banks had failed to demonstrate to the federlation why consumers and merchants should accept a [more expensive system than Ithe present methods of| I money transfers: cash and ) I cheques. [ The federation asked the, (Commerce Commission to) I request an Order-in-Council [ i be made declaring bank (cards to be an examinable! !practice and that the present!

r commission rate payable by retailers be replaced with a ' flat fee for bank card transactions. Earlier, the Examiner of ICommeral Practices (Mr A. F E. Monaghan) said bank ‘card commission charges J might be passed on to conisumers in higher prices ,i whether or not the consumer accepted the card. "The effect will be that those who do not accept , either system (Visa or bank . card) will be required to pay I increased prices if the i schemes are widely adopted i by retailers.” Mr Monaghan jsaid. II "The scheme would thus ‘have effects contrary to the public interest. In my opinlion, if the schemes gain 'wide acceptance, prices to Ibe paid will be inflated by merchants’ commission charges.”