Australians have woken to the news that the hated ATM withdrawal fees have been scrapped.
Here is our political class claiming credit:
Mr Morrison said the initiative — led by the Commonwealth Bank as it attempts to recover from a series of scandals — followed on from the government outlawing businesses profiteering from credit and debit card transaction fees.
“There’s a whole range of costs that are thankfully and usefully coming out of the system now and this is another one, but we’re taking action now and we’re glad to see the banks have too,” Mr Morrison said.
Labor MP Peter Khalil said the ATM decision had come after calls from Labor for a banking royal commission, while Liberal senator James Paterson said it was good to see the banks acting of their own initiative without government intervention.
Not quite. The real villain of this story is the Reserve Bank of Australia and their ill-considered 2009 “reforms”.
The nature of ATM fees changed in 2009 when a set of reforms was introduced by the Australian payments industry, with support from the Reserve Bank. Prior to the reforms, when a consumer made a transaction at an ATM that was not owned by their own financial institution (a ‘foreign transaction’), their financial institution paid an ‘interchange fee’ of around $1.00 to the ATM owner. The financial institution then passed that fee (and often more) on to their customer as a ‘foreign fee’ that was visible to the cardholder only on their subsequent monthly statement. By 2009, a foreign fee of $2.00 was common, double the typical interchange fee. The Reserve Bank was concerned about the inflexibility and lack of transparency of these fee arrangements and in 2009 interchange fees and foreign fees were removed. Instead, ATM owners were allowed to charge cardholders directly for making an ATM withdrawal, provided that the direct charge was disclosed clearly to the cardholder and the cardholder was given an opportunity to cancel the transaction (at no charge).
As my RMIT colleague Jason Potts and I have argued the RBA didn’t understand the underlying economic rationale for interchange fees and got the policy horribly wrong. In their pursuit of neoclassical purity and a desire to make the real world conform to their ideological priors the RBA instituted a policy that clearly disadvantaged consumers.