Virtual issuers blocked by card schemes

Issuers of virtual cards may have an easier time negotiating access to the MasterCard and Visa card schemes in Australia under reforms to regulations canvassed by the Reserve Bank of Australia.

The RBA said yesterday that it was "aware of an increasing number of entities - often foreign corporations focusing on non-traditional products such as 'virtual cards' - ... [which had] an interest in undertaking credit card issuing or acquiring activities."

The RBA, as payments regulator, intimated that some potential issuers had been blocked from joining the two schemes.

"The access regimes appear to have had the potential to prevent some entities from participating in the schemes when they might otherwise have been able to do so," the RBA said.

It's not clear which businesses may have been blocked. Two representative firms in the virtual cards space are Wrights Express (issuer of Motorcharge and Motorpass) and Blackhawk Network.

The RBA said that both MasterCard and Visa "have expressed an inclination to accept a wider range of participants into their systems... yet these prospective participants would not be eligible to participate under the [current] access regimes unless authorised by APRA as a deposit taking institution."

The RBA said it was "therefore possible that the regimes are now contributing to a higher barrier to entry than would be the case in their absence."

The RBA said it "identified three broad policy options - varying the access regimes to expand eligibility to a larger range of entities; revoking the access regimes; and maintaining the status quo."

Visa said in a statement: "We feel that the threshold to become a Specialised Credit Card Institution under the APRA/RBA regime may now be more restrictive than our own approach to membership."

"This presents a strong competition-driven case for either liberalisation or regime removal."

The RBA has also disclosed that it is considering joining the MasterCard and Visa systems in its own right as a provider of banking services. At present, the RBA provides card services for government departments on an agency basis.