Letter to the Australian Financial Review editor

4 November 2003

Dear Sir

I refer to the article in this morning’s edition under the headline ‘Merchant anger over knock-back fee’ and would like to express disappointment at the narrow and negative view taken by the journalist.

The article neglected to advise your readers that the Commonwealth Bank was the first to announce a reduction in its Merchant Service Fee to its 118,000 merchant clients. In the interests of providing greater transparency in its fee structure for authorisations, chargebacks and stationery, the Bank further reduced the Merchant Service Fee. This higher level of transparency went beyond the scope of the Reserve Bank of Australia changes.

The Bank considers that the application of the principle of user-pays is far more equitable and rewarding for the majority of merchant clients than recovering costs across all merchants. Feedback indicates our client base is very supportive of this approach.

Your article suggests that the declined authorisation fee increases a merchant’s vulnerability to fraudulent transactions, particularly for online transactions. This is clearly incorrect as there is no linkage between the two. What is relevant is that the risks involved vary considerably between businesses and are far higher than where the merchant and cardholder are not interacting face-to-face.

This higher risk underscores the desirability that merchants implement business practices to better manage their individual risks rather than obtaining relief by having such costs defrayed amongst all merchants.

Understanding the actual costs involved is important in managing the associated risks. This led to the Bank’s decision to provide more specific billing information to merchants.

We are disappointed that although this information was provided to your journalist, only the negative view was provided to your readers.

Yours sincerely

Bryan Fitzgerald
General Manager
Media and Community