Commercial Card Regulations Could Have Aussie SMEs Scrambling

Changes to commercial card regulations could be tripping up small businesses in Australia, according to reports on Friday (Sept. 2).

EconoTimes said the Reserve Bank of Australia is looking to include commercial cards under its interchange fee regulations, a move reports said could make it more difficult for SMEs to use the cards to access credit.

Now, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell is taking a look at the Reserve Bank’s potential plans.

The issue, officials say, is that there are rising instances of late payments to small businesses, forcing them to pay their own suppliers on credit. Paying with a commercial card means up to 55 days interest-free (an offer from the cards’ issuing banks). Reports said these commercial cards are key for small businesses that need to manage cash flow, with banks pulling back from this segment.

But commercial cards being pulled under interchange fee regulation could lead issuing banks to reduce the credit limits that are extended to the SME users of these cards, reports said, or could even begin pulling back altogether from the commercial card segment.

The proposals would see a cap on commercial card interchange fees, which are charged by the issuers to the payment recipient, at 0.8 percent. An interchange fee cap means less profits for the banks.

Discussion of including commercial cards under interchange fee regulation comes just days after the small business ombudsman revealed she would head a federal investigation into small business lending practices among Australia’s four largest banks.

Australia isn’t the only market where commercial card interchange fee caps could become an issue. Analysts have also examined how including commercial cards in swipe fee regulations in the U.S. would impact the market. Last year, analysts published a report, “Global Interchange Regulation: Pandora’s Box for Commercial Cards,” which examined the impact of interchange fee regulation under the Durbin Amendment and what would happen should commercial cards face those consequences.

The report also looks at the impact of the European Union’s decision in 2014 to include interchange fee caps on commercial card transactions.