It was refreshing to see Monday’s AFR describe as “rubbish,” testimony given by Ian Macfarlane, governor of the Reserve Bank, to a
Parliamentary Economics and Banking Committee. The same courtesy could not be
extended to Dr Veale, head of payments policy work at the Bank, for his alleged
exposure of “myths” about credit card regulation at a cards conference last week
– no one thought to tape his speech and
a copy was not provided: a response from Visa was published, alleging its
competitors were favoured by the RBA. Always get a tape.

A flashpoint in the dispute, between the RBA and Visa,
is the remarkably quick 20% surge (to 12 %) in the market share of Amex and
Diners “charge card” transactions – this in the wake of Visa and MasterCard no
longer offering lucrative “rewards” to their customers. That charge card schemes
were “untouched” (or favoured) by regulations that reined in credit cards is
either a myth or a fair allegation.

The early facts suggest Amex was favoured, but possibly
only by market inertia – the temporary addiction to “rewards” of some old
credit card schemers and the reluctance of merchants to object to paying Amex a
fee averaging 2.5% of sales (instead of 1% to banks). My bet is that any 20%
gain in market share for Amex will be eroded pretty quickly as reality is
restored and the addicts shun the humiliation of retailers saying “no” to Amex
cards.

The one thing I do not ever want to hear is the RBA
claiming credit for the inevitable erosion: in 1982 it was sufficiently
impossible to use an Amex card in
Singapore shops
that one vowed to never leave home with one again – and Mr Wong was told
clearly.

Of more importance is the rubbish about the “extra
functionality” – internet and phone – of Visa debit cards over banks’ normal
Eftpos debit cards. No card is ever used on the internet or phone – only the
details on the card can be separately entered and transmitted. Accordingly any
collective decision to deny the “extra functionality” of Visa debit cards (and
credit cards) to standard debit-card accounts should be dealt with. The implicit
agreement to handicap debit cards should be resolutely run to ground by the RBA and prosecuted aggressively by the ACCC as
a linked discretionary agreement unfairly fostering monopolization and unfairly
restricting trade.

While the RBA governor has been too long inclined to
retail “rubbish” to the Parliamentary Committee about payments policy, he did at
least say recently that the Visa debit card scheme was “a basic case of
misrepresentation … that we cannot
continue with that sort of misrepresentation.” We sure
can’t.