payments systemThe Reserve Bank has held out an olive branch to critics in the payments industry, promising to review its most criticised payments system regulations. In its submission to the Financial System Inquiry, The RBA said it would review the issuance of American Express companion cards by financial institutions and would consider "whether some changes to the regulatory treatment of these cards, or those of any other schemes that are currently not designated, might be warranted."The RBA also said it would study the impact of its decision allowing merchants to surcharge for credit card transactions, "with a view to whether further action by the Bank, Australian Competition and Consumer Commission or the Australian Securities and Investments Commission may be appropriate."The first issue goes back to 2001, when the RBA designated the MasterCard and Visa credit card schemes, which meant that it could set standards for the schemes covering fees, access and merchant practices.Visa and MasterCard have never been happy with this move and, in particular, they have been critical that the RBA has not applied similar restrictions to credit cards issued by American Express (the so-called companion cards that the big banks issue) under similar arrangement to their own cards.One effect of the RBA using its discretion to "designate" in this way is that companion cards offer consumers much more attractive rewards that most cards issued by Visa or MasterCard. The designated schemes say the RBA has tilted the playing field.Visa made this the focus of its submission to the FSI, backed up by research from Deloitte Access Economics. Visa said there was an "underlying regulatory flaw" in the Payments System (Regulation) Act, which is that regulation is not automatically applied to all payments systems but provides "subjective discretion" to the RBA to choose what is and what is not a payments system.Its submission said: "Regulation has not provided clear benefits to the Australian payment system, but instead has constituted a wealth transfer from Australian consumers to Australian merchants."On the surcharging issue, the RBA has been under fire for allowing merchants to apply surcharges on credit card transactions but not putting any effective mechanism in place to police the system and prevent excessive charges. Submissions to a review of surcharging by the Commonwealth Consumer Affairs Advisory Council last year were near-unanimous in saying that the RBA's merchant surcharging standard would not work unless a statutory body was given the job of monitoring merchant practices and enforcing the rules.MasterCard and consumer group Choice released figures last month, estimating that consumers paid a total of A$800 million of surcharges last year. MasterCard Australia country manager, Andrew Cartwright, said this amount was more than double the reasonable cost of card acceptance.Overall, the RBA believes its payments regulation has had a positive impact. It said: "A decade after the reforms, it is clear that the Australian cards market has remained vibrant, contrary to the arguments by the international schemes that the reforms could send the cards market into a 'death spiral'. "Innovation has continued, with