What about the argument that more regulation is needed because interchange fees aren’t transparent?

A:

Just because customers typically don’t know about interchange fees, doesn’t mean that these fees are not transparent. That is a bit like saying that a bakery isn’t being transparent because it doesn’t tell you how much it cost to transport the flour to the bakery in order to make a loaf of bread.

As Professors Sinclair Davidson and Jason Potts explain, the economic theory of information in competitive markets says that consumers do not need to see all the costs of the components of a product – they only need to know the products attributes and its total price. So, what really matters for consumers is that they know the fees and charges, and terms and conditions that apply to their own credit or debit card – not the fees that are paid by merchants and their banks.

For more on the transparency argument see IAEP Chairman Iain Murray’s post here.

The real transparency problem surrounds the regulator itself. The RBA’s Payment Board meetings are secretive and non-minuted, meaning that it cannot properly be held accountable for its decisions. Further, no one can explain why the Reserve Bank is in the business regulating interchange fees rather than the Australian Competition and Consumer Commission or another specialised competition regulator.