The market value of Mastercard, Visa, and American Express totals $1,200 billion. Together, they have revenues of about $80 billion a year. They are American companies listed on the New York Stock Exchange.
Quite a lot of their revenue comes from Australia. It is worth mentioning this as the Government flaffs around trying to respond to the shrinking role of cash in the economy and growing tendency for businesses to refuse taking cash for payments.
Australians pay about $5 billion a year in credit and debit card surcharges and put about $430 billion on cards each year. It is about a quarter of what Australia produces each year, and the Americans cream off more than 1 per cent of it.
So far, the Government has proposed banning surcharges on debit cards and proposed mandating that some – but not all – businesses accept cash. It is an inadequate and tiny response to the gradual foreign takeover of what should be one any nation’s core roles: the provision of currency and to ensure that it is stable.
Essentially, the Government is responding to public disquiet – better expressed as voter whinges. Those whinges will get louder a more businesses refuse to take cash and demand electronic payments with the concomitant surcharge.
True, under Australian law businesses can only pass on what it costs them, but it is still a sting. Moreover, businesses benefit from electronic payments because it is cheaper than handling cash: taking it to the bank; installing security as cash is a lure for burglars; watching staff for theft; taking cash to the bank each day; organising small change and so on.
If anything it should be the other way around: businesses should impose a surcharge for cash or a discount for electronic transactions.
That said, the Government’s response so far has been narrow and palliative. It should be big, imaginative and revenue-generating.
How about this: the Government should legislate for the Reserve Bank of Australia to run the credit and debit card system through the retail banks. So instead of the retail banks issuing Mastercards and Visas they would issue an Australian Reserve Bank Card.
Indeed, Australia was one of the first countries to do credit cards through the banking system with Bankcard in 1974. But then we allowed the Americans to take the business over. We should get it back and the $5 billion a year revenue that goes with it.
Most new government programs are met with the cry: “Where’s the money coming from?” This one starts with the questions: “Where’s the money going to? And why are we allowing it to go there?”
The Constitution gives the Commonwealth power over “currency, coinage, and legal tender” and “banking”.
It could probably ban the use of foreign credit cards using these powers and the foreign trade power, but it would not be necessary.
The Australian Reserve Bank Card could quickly dominate the market, by not having any annual fees nor any debit card surcharges. It could have lower credit-card surcharges and much lower interest rates on unpaid balances.
The only sticking point would be the rewards programs. People might cling to their foreign cards to earn the rewards points. The simple solution to that is to ban rewards programs. It could be done under competition policy, in a similar way to the present bans on third-line forcing and other measures that stop businesses pushing the products of other businesses.
This suggestion comes as the US is about to enter an isolationist, America-first phase. Tariff wars and isolationism hinder economic growth and world peace, as we shall see. But the Australian Reserve Bank Card would not have to be part of a tariff war. Rather it would be Australia entering a competitive market with a superior product and attracting customers.
The Australian Reserve Bank Card would also be prohibited from offer rewards programs – so the playing field would be level.
This is achievable. The Reserve Bank’s balance sheet (equivalent to market capitalisation) is $614 billion – about the same as that of Visa.
The other big advantage would be a $5 billion-a-year improvement in Australia’s balance of trade.
It’s about time the Albanese Government did something bold, adventurous, imaginative, and in the national interest.
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Last week the Chief Justice of the ACT Supreme Court described having a “feeling of unease over what juries make of allegations, particularly in sexual assault cases”.
Opening the 2024 Jury Research and Practice Conference held by the Australasian Institute of Judicial Administration, she said, “I want to understand why in the 2020s, jurors find it so hard to believe allegations of sexual assault.”
Part of the answer came from her court colleague Justice Belinda Baker. She cited questions about why victims might delay reporting; the accused’s right to silence; rape myths; and other misconceptions.
She thought that a judge’s directions to juries “are a weak mechanism” for dealing with these things. Even experience barristers found directions difficult to understand. She said it would be better if expert evidence were permitted to explain things to juries.
Yes, but . . . . Surely the problem is the whole jury system. If you were designing a criminal-justice system from scratch, there is no way you would start with randomly choosing 12 people from the electoral roll to listen to days of complicated evidence and a summing up that even experienced barristers might find difficult and then to determine guilt.
You are almost bound to get one or more people who are simply not up to task.
Of course, we cannot understand why jurors find it difficult to convict or why or how they come to any decision at all. They don’t have to give any reasons, and the law prohibits them from disclosing what went on in the jury room.
And that, of course, makes the appeal process much more difficult, as judges revere juries and jury decisions as if they have a mystical or quasi-religious quality that makes them harder to be subjected to reasoned scrutiny.
In all, though, it is a good start to see some judges questioning some parts of the jury system.
Crispin Hull
This article first appeared in The Canberra Times and other Australian media on 20 November 2024.
Brilliant! I am so glad to see that someone can see the flaw in the card surcharge system. Years ago, I worked in a service station and was tasked with balancing the till, sorting and banking the cash. Substantial time was spent travelling to and waiting in line at the bank. More recently, we ran a motel in regional NSW. I loved the card transactions because all the hassles created by cash vanished.
I would hate to be subjected to the difficulties of banking cash now, as the banks are rapidly closing all their branches and removing ATMs. Discounting card transactions makes much more sense, as I feel the fees are used as a profit top up by business. If the fees to customers must stay, they should be policed to stop the many take away food shops and the like, that add a “flat fee” of 50c to $1.00. Do the maths and see how that bottle of drink is really costing as a percentage.
Thanks for a great article.
The credit card idea is excellent, the only trouble is Big Finance would make sure it never happened. I have been a member of a credit union for 40 years, in fact I was a director of the original small credit union when it merged with a slightly bigger one setting off a never-ending series of mergers and acquisitions culminating in it being able to become a bank. I could not understand why it then commenced to give large donations to environmental causes instead of giving members the benefits of low fees on transactions and loans, good interest rates for borrowers and depositors. Then the penny dropped: the big banks would have lobbied against a competitor like that being given a banking licence. Presumably, a deal was struck by which the new bank would not undercut the big banks’ sources of profit to be paid to shareholders as dividends and executives as multi-million dollar salaries. The credit union bank being a mutual cannot distribute the profits, which it does not need but which are generated by having to emulate the Big Banks, to the members so would agree to give them to worthy causes.
Good points about the government having power over currency. The RBA can create as much currency as the government/economy needs without the need to borrow.
Secondly, the scam about Credit/Debit/EFTPOS surcharges is that they are percentage based. You can’t tell me that it costs more to transact $1000 than it does to transact $1. They are just numbers in a computer. Maybe the first step would be to make it illegal to charge a % of the transaction value.
It is illegal for businesses that do not take cash to charge a surcharge for card payments where they do not offer an alternative fee-free option (although some seem to get away with no option if you book online).
That said an Australian based card (like the old bank card) would probably only work in Australia, so the only real option would be to set up a competitor that operated worldwide and that would likely fail due to economies of scale. Most people who travel would keep their existing cards.
I can’t see why businesses are allowed to charge a surcharge when the cost of taking cash is demonstrably higher and they are not allowed, by for example Afterpay, to recover their fees (often around 4%). Some other countries do not allow surcharges eg all of Europe and I found none in Japan or Singapore (but businesses in some other Asian countries often do).
Anyway, it has sent me back to paying in cash where I can, but still think businesses should be banned from Charing surcharges, given card payments predominate. Whether businesses should be forced to take cash is debatable.
Sexual assault cases: it is not just the jury system, it is the adversial trial system and the concept of “beyond reasonable doubt”. The answer is simply to reverse the onus of proof.