Proposal to Require Banks and Payment Firms to Disclose Interchange Fees for Processing Credit or Debit Card Transactions
Prime Minister's OfficeSpeakers
Summary
This question concerns a proposal by Mr Murali Pillai to require banks and payment firms to disclose interchange fees for card transactions to foster a more competitive payment landscape. Senior Minister Tharman Shanmugaratnam replied that the merchant discount rate (MDR), which includes interchange fees, is already disclosed to merchants by payment service providers. This transparency allows merchants to negotiate for better deals or switch to cheaper payment modes like PayNow and SGQR. The Senior Minister noted that the payment services industry is already highly competitive, with significant churn among merchants seeking better service terms. Therefore, MAS does not see a need to mandate additional disclosure at this point because MDR information is already freely available.
Transcript
2 Mr Murali Pillai asked the Prime Minister whether MAS will consider requiring all banks, including digital banks, and payment firms providing services under the Payment Services Act to disclose what they charge as interchange fees for processing credit card or debit card transactions so as to provide for a more competitive landscape for such services in Singapore.
Mr Tharman Shanmugaratnam (for the Prime Minister): Merchants are charged a processing fee for credit and debit card transactions by payment service providers (PSPs), be they banks or other providers, such as NETS. The processing fee, commonly known as the merchant discount rate (MDR), includes the interchange fee1 which is set by card schemes, such as Visa and Mastercard.
MAS agrees with Mr Pillai that transparency is important to foster an efficient and competitive payments ecosystem. PSPs, currently, already provide information on their MDR to merchants. This enables merchants to negotiate with PSPs for better MDRs and to opt for PSPs that offer the most attractive deal. Merchants can choose cheaper modes of e-payment acceptance, such as PayNow or SGQR, which have been gaining stronger traction over time.
As information on MDR is already freely available to merchants, there is no need to mandate disclosure of MDR at this point. The payment services industry has become highly competitive, especially with the influx of new players. PSPs compete with one another to offer cheaper or more attractive services to secure merchants and, indeed, there is a significant churn amongst merchants switching from one PSP to another.