The Reserve Bank’s payments department is set to lose its top official ahead of attempts by the Morrison government to reconfigure the regulatory settings for Australia’s payments sector.
Multiple sources confirmed to Banking Day on Tuesday that Tony Richards, the head of the Reserve Bank’s payments department, will leave the regulator at the end of the year after nine years in the influential post.
As head of the payments department Dr Richards was responsible for providing analysis and advice to the RBA’s Payments System Board.
According to the sources, Richards had been planning to leave the regulator for some time but delayed a decision until the PSB’s retail payments review was completed.
The consultation period for the review wound up in July and the final policy recommendations are expected to be released in the next month.
The review has proven one of the most controversial conducted by the PSB since it was established as a specialist regulatory entity within the Reserve Bank in 1998.
In its preliminary findings published in May the PSB indicated it was not ready to mandate that the major banks introduce least cost routing (LCR) services for merchants across multiple digital payments channels.
LCR services give retailers the power to direct contactless and online debit card payments to the cheapest payments network - usually Eftpos Australia.
However current industry practice allows the major banks to route such transactions to networks operated by Visa and Mastercard that result in retailers paying higher average fees.
The PSB’s unwillingness to mandate LCR triggered an unprecedented intervention from federal treasurer Josh Frydenberg who told the PSB last month the government would introduce measures to support cheaper merchant fees.
“The Government will consider changes that may be necessary to promote least-cost routing more broadly, particularly in an online and contactless environment,” Frydenberg told the PSB in a letter.
Frydenberg also put the heat on the PSB to reverse its preliminary finding on single network debit cards, urging it to introduce rules that would limit the ability of medium-sized institutions to issue such cards.
While most payments experts believe the PSB is likely to fall into line with the government’s policy requests, industry stakeholders will have to wait a few more weeks for confirmation.
One of the ironies of the bitter LCR debate between small business groups and the banks is that Richards played a seminal role in opening public debate on the merits of giving merchants a say in how their acceptance costs should be managed.
In a speech to the Australian Payment Summit in Sydney in December 2017, Richards presented RBA research that showed for the first time most Australian merchants would be able to lower their costs of accepting debit card payments if the banks were prepared to offer least cost routing.
The irony is that barely anyone in the retail industry, the media and the federal government understood anything about LCR before that speech was delivered.
Richards has spent almost 25 years working at the RBA in various roles including stints as head of the economic research and economic analysis departments.
His career at the