Payment Card Access Regimes: Conclusions – March 2014 Background

Over the past year, the Payments System Board has consulted on possible changes to its Access Regimes for the MasterCard and Visa credit card systems and the Visa Debit system. A consultation paper published in May 2013 sought views on options for altering or removing access regulation. A second paper in December 2013 expressed a preliminary view in favour of an option that would remove the existing specialist credit card institution (SCCI) framework, administered by the Australian Prudential Regulation Authority (APRA), and impose some controls via amended Access Regimes. The Board has now made an in-principle decision to vary the Access Regimes in line with the preferred option outlined in December.^[1]

When Access Regimes for the MasterCard and Visa systems (‘the schemes’) were first introduced in 2004, the intention was to achieve a better balance between allowing new participants in those systems and controlling risks. Given the restrictive nature of entry at the time, this meant requiring the schemes to consider for membership entities that were not traditional authorised deposit-taking institutions (ADIs). This was achieved through the establishment of SCCIs as a new class of ADI, in conjunction with a requirement in the Access Regimes that SCCIs be eligible for membership. However, the likely legal interpretation of the Access Regimes is that only ADIs (including SCCIs) are eligible to join the MasterCard and Visa systems, meaning that prudential supervision by APRA is a requirement for any participant.

The environment has now changed significantly. Most importantly, MasterCard and Visa have both changed corporate structure to become publicly listed companies rather than member associations of banks. This suggests that the schemes are likely to be more open to new types of participation, while the emergence of new business models is creating stronger interest in direct membership. As a consequence, the Access Regimes' requirement for participants to be ADIs may now be constraining new entry. At the same time, experience with the SCCI framework suggests that its requirements – which reflect APRA's focus on deposit-taking institutions – are more onerous than necessary for the risks generated in credit card business. This means that some participants may be deterred from seeking scheme membership, while others that seek membership may face higher than warranted costs. In addition, the SCCI regime places significant demands on APRA resources in response to risks that are not closely related to APRA's core mandate.

Footnote

A details-stage regulation impact statement will be available on the Office of Best Practice Regulation's website. [1]