RBA to review card interchange fees and surcharging

Earlier this week, the Reserve Bank of Australia's Payments System Board released an issues paper, as the starting point for another review of card payments regulations, in line with a recommendation in the final report of the Financial System Inquiry.

The FSI panel was particularly keen for the Payments System Board to re-open the issue of interchange fees and surcharging. The Board will also consider any submissions on card payments regulation made in response to the current Government consultation on the FSI recommendations.

The issues paper traces the many incremental changes to payments systems over the past decade, noting that average merchant service fees for MasterCard and Visa transactions have fallen by 63 basis points relative to their levels prior to the reforms. Looking across all card systems, the overall drop is 38 per cent.

Contrary to the 'death spiral' predicted by some who opposed the card payments system reforms begun in the early 2000s, the Australian cards market has continued to grow and innovate, with the value of card transactions growing from A$187 billion in 2002 to $510 billion in 2014, according to the RBA.

There are now new pressures on the sector, such as mobile devices that can accommodate more than one brand of card, and review is needed of some definitions that time has shown to be ambiguous (such as 'broadly in conformity with', which some parties suggest might be contributing to an uneven playing field thanks to ambiguity in the wording).

Submissions on the issues paper are sought by 24 April 2015.

The Board also announced that "in light of the review of card payments regulation and to ensure that it does not impose unnecessary compliance obligations," the RBA will waive the recalculation of the benchmarks that would otherwise be required by 30 September 2015.

Accordingly, the obligation to comply with the Bank's interchange fee standards as of 1 November 2015 will be based on the current benchmark levels.