The Consumer Council yesterday demanded a shake-up of the EPS electronic payment system, saying a banking monopoly had for years left shops and consumers powerless to dispute fees. The 35 banks behind the company running EPS were not competing with each other, there was no real alternative to EPS, and shops accepting payment by debit card had no choice but to pay what was asked, the council said. Its findings come four months after the EPS company sparked outrage among travel agents, jewellers and computer vendors by changing their billing system; shops said the move would cost them - and consumers - more than $200 million a year extra. Chairman of the council's competition policy committee, Professor Tsang Shu-ki, said EPS's market position was so strong that there was no hope of an outsider ever trying to compete. He said EPS Co should be shaken up to allow individual member banks to negotiate transaction fees directly with shops, giving vendors an opportunity to shop around for the best deal and pass on benefits to consumers. 'It appears that rather than engage in the costly and risky endeavour of competing with each other in the provision of a debit-card network service, potential competitors have joined together,' Professor Tsang said. '[This] has denied merchants the opportunity to take advantage of the rivalry that would be expected to arise between those banks. The fact that EPS Co was in a position where it could unilaterally impose a substantial fee increase . . . is a strong indication that it was not facing the discipline of a competitive market.' The council said the company's dominance meant shoppers and the economy suffered. 'High transaction fees have an inflationary effect on retail prices as, no matter how competitive their industry is, retailers will eventually have to pass on the inflated costs to consumers,' its report said. The council said the company should be remodelled on examples set in the US, Canada and Australia, where banks compete for deals with individual shops for provision of debit card and other banking services. Shops still accept rival banks' cards, and the banks transfer the money between themselves. 'In the Australian example, for a large number of merchants such as retail chains, network members (banks) actually compete to pay those merchants to use the payment system, rather than the reverse,' Professor Tsang said, explaining that it encouraged shoppers to use debit cards more often. The furore in April erupted when EPS Co changed the way it billed some shops from a flat $2 fee per sale to 0.75 per cent of the cost of the goods. Under the council's blueprint for change, shops could negotiate a flat fee or percentage rate, along with other services such as overdrafts. The Hong Kong Monetary Authority has agreed to review retail payment services and look specifically at 'whether any deficiencies in competition operate significantly against the public interest'. EPS Co said last night that if the current structure was dismantled, shops and customers could end up paying more. 'As a consortium of 35 banks, EPS Co is able to achieve significant cost savings through economies of scale,' a company statement said. 'If this structure were to be dismantled . . . there is no evidence that there would be any material benefit to merchants or consumers. Indeed, there is a risk that this could lead to higher costs for some.' The company said it would co-operate with the Monetary Authority's review.