Backgrounder on the RBA’s Current Payments Regulations

Overview

Under the Payment Systems (Regulation) Act 1998 (PSRA), the RBA may designate a payment system if it considers that designating the system is in the public interest. It may then impose an access regime or establish standards that participants in the system must comply with:

• Access regimes set out rules with respect to participants ability to join designated payment systems.
• Standards determined by the RBA to date have generally set out rules that relate to the governance or operation of designated payments systems and the conduct of participants within those systems.

Some organisations have provided written undertakings to the RBA in relation to standards determined under the PSRA or certain policy concerns relating to efficiency and competition in the Australian payments system. Undertakings are commitments made by organisations to the RBA about conduct in relation to payments systems.

This Backgrounder lists the designations, access regimes, standards, undertakings, guidance and exemptions as at October 2024 relevant to the regulation of the payments system.

Card regulation

Designations

The objective of designating a payment system is to allow the RBA to impose an access regime on, or establish standards for, that payment system if it considers that doing so is in the public interest. The RBA has imposed instruments prescribing access regimes and/or specific standards for the following designated card payment systems.

Access regimes

The objective of the following access regimes is to promote efficiency and competition among payment service providers in the Australian payments system.

These access regimes place limitations on the types of restrictions scheme operators can place on scheme membership eligibility and on the credit card acquiring activity of members. The amendments introduced in 2015 provided the card systems with the flexibility to expand membership beyond existing participants. The card systems are required to have in place transparent eligibility and assessment criteria and to report information about membership and applications to the RBA.

Interchange fees

Objective

The objective of the RBA’s interchange standards is to ensure that the setting of interchange fees and other transfers in card schemes is transparent and promotes efficiency and competition in the Australian payments system. The standards limit interchange fees in designated card payment systems, with the aim of reducing payment costs to merchants.

Regulations

Guidance

The RBA has provided the following guidance on the above standards to support a consistent interpretation of some terms and clarity around the RBA’s views and expectations on related issues. This guidance is not a substitute for parties obtaining their own legal advice.

Net compensation

Objective

The following standards apply to designated card schemes and place limits on non-interchange payments to issuers (‘net compensation’). The objective is to prevent circumvention of the limits on interchange fees by arrangements involving non-interchange payments or other incentives being provided by schemes to issuers.

Regulations

Guidance

The RBA has provided the following guidance on the above standards setting out an expectation that issuing contracts contain a methodology for valuing non-monetary benefits, for the purpose of making assessing compliance with the net compensation provisions more straightforward.

Surcharging and merchant pricing

Objective

The objective of the following surcharging regulations and merchant pricing undertakings is to promote efficiency and competition by promoting scheme rules that allow merchants to charge an amount for accepting a payment method that reflects the merchant’s cost of acceptance for that payment method.

Regulations

Undertakings

Honour all cards

Objective

The objective of the following ‘Honour All Cards’ undertakings is to promote competition and efficiency by allowing merchants to choose which cards they accept.

Undertakings

Least-cost routing

Objective

The schemes listed below have given the following voluntary undertakings that they will not engage in ‘tying’ conduct by making preferential ‘strategic’ interchange rates on credit card transactions conditional or ‘tied’ to the value or volume of a merchant’s debit card transactions. The objective of these undertakings is to address concerns that such conduct could limit competitive pressure in the debit card market, which has the potential to impose additional costs on the payments system.

Undertakings

ATM system regulation

ATM access regime

Objectives

The following ATM access regime was introduced in 2009 as part of a broader set of industry-led reforms aimed at promoting efficiency and competition in the ATM market. Its primary objectives are to:

• increase competition in the ATM system by making it easier for firms to enter
• introduce greater competition in ATM fees by removing the inflexible and opaque interchange arrangements and transitioning the industry to a more transparent direct charging model where ATM owners can set their own fees and compete for transactions
• increase ATM deployment by giving ATM owners the flexibility to reflect the cost of deployment in the fees they charge.

Regulations

Exemptions

The RBA may grant an exemption to a participant in the ATM system from any or all of the requirements of paragraphs 11 and 12 of the ATM access regime in accordance with paragraph 16 of the regime. The following exemptions have been granted.

Regulation of purchased payment facilities

Under Part 4 of the PSRA, the RBA has regulatory responsibilities in respect of purchased payment facility (PPF) providers, except where provision of a PPF has been determined to be banking business under Regulation 6 of the Banking Regulation 2016 (providers of such PPFs are required to be authorised and supervised by APRA). The RBA may authorise a corporation to be the holder of stored value of a PPF under section 23 of the PSRA. To date, the RBA has not authorised any corporation under section 23. Under subsection 9(3) of the PSRA, the RBA may declare that the PSRA does not apply to a specified PPF or to facilities included in a specified class of facilities. The RBA may also exempt corporations under section 25 of the PSRA. Such an exemption allows them to be the holders of the stored value in respect of PPFs, even though they are not authorised deposit-taking institutions (ADIs) and do not hold an authority under section 23 of the PSRA that covers those facilities. The following declarations and exemptions have been made.

Declarations under subsection 9(3): Exempt purchased payment facilities

Exemptions under section 25: Holders of stored value