PSB defers cut to interchange fees
A threatened cut in the level of interchange fees paid on credit card transactions, to an average of 30 basis points, won't be introduced for the time being, the Payments System Board said yesterday.The mooted cut from around 50 cents, on average, at present, was raised as a likely step by the PSB in September 2008 when the payments regulator outlined its preliminary views on its review of rules first worked out by the board earlier this decade.Steering interchange fees - paid by a merchant's bank to a card-holder's bank - to lower levels has been one of the core objective of the PSB since it (with moral support from the Australian Competition and Consumer Commission) tackled inflexibilities in the framework of the cards and payments market in the early 2000s. The PSB is an offshoot of the Reserve Bank of Australia.The PSB's decisions on credit card regulation and control of interchange this week are something of a surprise.MasterCard and Visa had negotiated for months to devise undertakings that largely replicated the existing regulations introduced by the PSB in 2003. The PSB has not really explained its rationale, which at this stage is confined to the media release published yesterday.One reason may be some aspect of the detail in the undertakings proposed by MasterCard and Visa, though what it is the PSB wanted from the two credit card schemes and did not get is not clear.The second reason, more clearly explained in the PSB media release, is the lack of progress among banks in progressing investment in the revitalisation of Eftpos as a useable, online alternative to credit card payments.The industry has set up Eftpos Payments as a stand-alone company and is also re-evaluating the Mambo (or Me and my bank online) idea proposed by Bpay. Mambo would allow some form of person to person payment (across existing bank payments networks).In formal responses yesterday industry representative expressed disappointment in the RBA's lack of willingness to scrap many of the regulations."Today's decision does leave the long-term regulatory framework for consumer payments in Australia hanging, with no clear end date," Chris Hamilton, executive director of the Australian Payments Clearing Association, wrote in a media release."Uncertainty about how and when the regulators will respond makes such collaborative effort that much harder."Chris Clarke, Visa General Manager for Australia, New Zealand and South Pacific, in a media release said that "today's announcement will discourage investment and innovation in the industry."