New players line up to enter the payment card market

New Visa and MasterCard scheme membership rules, written in response to Reserve Bank changes to its card access regime, have opened the door for a range of new entrants in the credit and debit card markets.

MasterCard confirmed that, so far this year, it had been approached by five organisations, both local and international, inquiring about membership of the scheme.

Visa also said that it had received applications and expressions of interest from "merchants and processors".

"These are in initial stage review and will go through a full licensing process before any approvals are granted," a Visa spokesperson said.

On January 1 the Reserve Bank varied the access regimes for the MasterCard and Visa credit card systems and revoked the access regime for the Visa debit system.

The RBA also abolished the ADI category of specialist credit card institution.

The combined effect of the old access regimes and the SCCI rule was that only authorised deposit-taking institutions were eligible to join the MasterCard and Visa systems.

The changes will give the schemes greater flexibility to expand their memberships. The RBA said in a review that it was satisfied the card schemes were open to admitting new types of members.

Visa and MasterCard have published new criteria for scheme membership.

The RBA also said it was confident that removing regulatory restrictions on new entry would not cause or contribute to increased risk in the financial system.

Because a card issuer need no longer be an authorised deposit-taking institution, the local market could see the entry of monoline credit card companies from overseas.

Others could enter the market as specialist merchant acquirers, joining payments company tyro.

And finance companies and retailers offering cards through arrangements with other issuers could issue in their own right.

One finance company considering such a move is FlexiGroup. The company offers Visa cards under the Once and Lombard brands, which are issued by Cuscal.

FlexiGroup chief executive Tarek Robbiati said that, under the old regime, if the company wanted to be the card issuer it would have had to apply for a licence as an SCCI. He said the SCCI obligations were too onerous.

Cards are a good business for FlexiGroup, a store finance specialist. It bought Lombard in 2012 and Once in 2013, and the cards division is producing cash profit of around A$10 million a year.

Robbiati said FlexiGroup had a good relationship with Cuscal but there were a number of reasons why doing its own card issuing could be the way to go.

As a card issuer, FlexiGroup would earn interchange fees on transactions. And having greater control over the issuing side of the business would give it faster time to market.

"In the card market you segment your target market. As an issuer, we could be more sophisticated in our marketing, such as co-branding with retail partners," Robbiati said.