In reply to Joseph Corcoran.

Sorry “Regulation E” is over my head except that I note “The E-Sign Act provides that electronic documents and signatures have the same validity as paper documents and handwritten signatures.” Well, anyone that uses an internet banking service already understands that …

Nevertheless, if “transaction costs that are a fraction of the current Credit Card fees” is to be achieved then, obviously, the process has to be via a generic form of EFT via ACH.

The material point is, mere “merchants” don’t have direct “interactive” access to depositors’ debit accounts in licensed financial institutions except via bank-accepted systems such as do MasterCard, Visa, EFTPOS, et al. ACH direct debits are not “interactive”—as are credit card and EFTPOS transactions. Unless you can come to terms with every individual financial institution to allow you access to debit accounts in such an “interactive” non-aggregated manner, as do have MasterCard, Visa and EFTPOS, et al, then you are stuck with the relatively primitive non-interactive ACH direct debit function which is not suitable for POS transactions.

Having said that, your process suggests a reversing of the process to one where the payer, on their phone, somehow authorizes their bank to make a direct credit to the payee; sounds simple but I can’t imagine how a bank could allow such a process without running foul of the multiple layers of security measures that are usually involved for the initiation of such EFTs. Indeed, I suspect that this is why credit card fees are higher, to cover the risk involved with the simpler credit card process.

Regardless, if the MCX merchants don’t like paying for the risk involved with credit card transactions, they should simply refuse to accept credit cards and accept only debit card transactions, via the established systems. It appears to me that thereby the lower cost would be achieved and the cost of all the extra work involved in trying to develop another independent system would be unnecessary …

Indeed, you will undoubtedly be aware that the large German retailer Aldi accepts only debit cards and operates that way very successfully, and only in countries that have regulated to allow the merchant to add a reasonable surcharge for the use of a credit card does Aldi accept same.

Ultimately, I guess we will have to wait and see how those “700 million store card” carrying consumers respond; funny though, I have not seen a “store card” in Australia for I can’t think how long; gave up mine ~30 years ago when the original “Bankcard” first arrived on the scene; the merchants did not then like that original bankcard either but still it ultimately prevailed …

Alternatively, if by “store cards” you mean those funny store-branded “rewards” MasterCards and Visas connected to the likes of vulture financial institutions like GE Finance, well, those consumers possibly don’t have any debit funds to draw on anyway …