Two years to cooperate on payments

Banks and credit card companies get a year or so to cooperate on, and invest in, their payments businesses. Most of this investment will have to be in debit, including Eftpos.

If banks do invest in Eftpos then the Reserve Bank of Australia may lift the controls on interchange fees in payments imposed five years ago.

If not, the banks can expect the RBA to mandate further cuts in interchange from the first quarter of 2010.

And whatever happens with interchange, access regimes remain in place, while the Payments System Board will maintain "close oversight".

The Payments System Board yesterday released the "preliminary conclusions" of its review of its work to date in payments regulation.

In its current form this dates to rules debated in 2001 and 2002 (and litigated for several years thereafter).

No doubt with an eye on future legal action, the PSB presents its views of the moment as preliminary, though fully explained, including the planned regulatory steps and projected price controls.

A licence to lift an unwanted regulatory regime forms the core of the PSB proposal to payments' decision-makers.

If they accept the deal then interchange prices will be set once again by debit and credit schemes on their own terms, as they were for thirty years until the RBA set the rules five years ago.

Industry must want this part.

The question is whether they will wear and pay for the other part of the RBA deal.

Banks have restricted, and really starved, debit and Eftpos of investment for two or three decades.

BPay and pay anyone internet banking are among the innovations of the arena. Both, though, ride on the low cost, and safe, but super slow batch processing for many everyday payments.

Recent investment by banks in debit was for scheme debit; and only then in a limited way.

As it stands Eftpos is a payment product with progressively narrow appeal. This appealing savings account and payment card combo from every bank remains useless as a mechanism for online payments.

Now the RBA is saying it's time to make Eftpos useful.

Reform of periodic payments might also make it on to the agenda.

Retail payments have to join the wholesale payments stream and clear quickly, leaving batch processing to history. Business payments also need reform.