Reserve Bank’s review of Australia's payments system interchange fees

The Reserve Bank has released the preliminary conclusions of the 2007/08 review (pdf) of the payments system reforms undertaken by the Payments System Board.

In respect of the regulation of interchange fees, the Board’s view is that further changes to improve competition are possible, and that these changes could be implemented by industry, rather than the Reserve Bank. These improvements to the competitive environment include:

• changes to the EFTPOS system to allow it to compete more effectively with the other card schemes over the longer term;
• the card schemes allowing merchants the freedom to make independent acceptance decisions about each type of card for which a separate interchange fee applies; and
• an increase in the transparency of interchange fees and scheme fees.

The Board is proposing that, at its August 2009 meeting, if at that time it were satisfied that sufficient progress had been made by industry, it would proceed to remove the interchange regulations. If, however, the Board judged that insufficient progress had been made, its current thinking is that interchange regulation would continue, with average interchange fees on credit cards being reduced from around 0.50 per cent of the transaction value to around 0.30 per cent. In addition, a common interchange fee of around 5¢, paid to the cardholder’s financial institution, would be established for the EFTPOS system and the debit card system operated by the international card schemes.

Any new arrangements could be expected to be in place in the first quarter of 2010. Until this time, the current arrangements, with some minor modifications, would remain in place. 

The Bank is seeking submissions from interested parties by 30 June 2008.