The Reserve Bank of Australia is concerned about merchants' rising costs to accept contactless payments as more consumers in the country choose to pay with smartphones, according to local media reports.

And the RBA is threatening more bank regulation if something is not done. 

At the center of the issue is debit contactless payments, according to the RBA. Since consumers make such purchases with a Visa or MasterCard-branded card, those transactions are processed through the networks those companies own. 

The RBA noted in a recent meeting that before contactless payments became popular, such debit transactions would have flowed through the lower-cost eftpos debit network.

The RBA said that it wants merchants to have a choice in how contactless debit card payments are processed since the eftpos recently upgraded its system to better handle contactless payments.

"The Board strongly supported calls from a range of stakeholders for acquirers to provide merchants with least-cost routing functionality for contactless transactions using dual-network debit cards," the RBA's Payments System Board said in a statement about last week's meeting. "It requested the bank staff to continue to engage with the payments industry on this issue, recognizing that a prompt industry solution was preferable to regulation."

The RBA noted last week that the average transaction cost for a Visa or MasterCard transaction was 0.58 percent of the transaction while it is 0.26 percent for eftpos. 

The Sydney Morning Herald reported that banks have just started to offer merchants an option on contactless debit card payments. ANZ Bank said at a parliamentary hearing last month that it intended to make a change.

National Australia Bank confirmed to the Herald that it was in discussions about it, but that Commonwealth Bank and Wetpac have not made the same commitment as ANZ.