Review of the Regulatory Framework for the eftpos System: Consultation on Designation – March 2012 4. Review of the Regulatory Framework: Access and Interchange Fees

Collectively, the developments outlined in Section 2 mean that the regulatory framework for the eftpos system, including the designation, the eftpos Access Regime and the interchange fees Standard, along with the industry Access Code, may no longer be meeting their original objectives. While the current review is focused on the appropriate form of designation for the system – should ongoing designation be considered to be in the public interest – knowledge of the possible approaches for future regulation may help interested parties in forming their views about designation. Accordingly, this section outlines the likely scope of the broader review as background. The Bank is not seeking views on the broader regulatory framework during the current consultation; as discussed, this will be the subject of a consultation later in the year.

The issues that the broader review of eftpos regulation are likely to consider include:

• The implications of the establishment of ePAL for the current system of access, including the Bank's eftpos Access Regime and the industry-administered Access Code. This may include consideration of the role ePAL should play in governing access to the eftpos system for new entrants. It may also consider whether the access framework should continue to support entry outside the ePAL framework; that is, where entrants do not wish to become members of ePAL.
• Whether there is a continued need for the ‘no-discrimination’ provisions in the Bank's eftpos Access Regime. These provisions are aimed at preventing participants from using negotiations over interchange fees to frustrate access to the system. Given that ePAL has now established a common multilateral interchange fee schedule, new entrants are able to gain access to the system on the same terms as existing members, without the need for negotiation over these fees.
• Whether provisions in the Bank's interchange fees Standard that govern bilateral interchange fee agreements remain appropriate given the introduction of a multilateral interchange fee schedule. In particular, should bilaterally negotiated fees continue to be regulated in the current manner; be regulated according to a different benchmark to the current cap and floor, including potentially being placed on a similar footing to multilateral fees (a 12 cent cap, paid to the issuer); or be removed from the regulatory framework?
• Whether there is continued need for regulation of multilateral interchange fees.^[7]
• The implications of the move to the COIN for the exchange of eftpos messages in terms of connection costs and timeframes for access.

While there are many possible outcomes from deliberation of the above issues, one option would be the removal of all regulation of the eftpos system. This option might result in the removal of the eftpos designation. All other options would involve consultation on changes to the current interchange fees Standard or eftpos Access Regime, for which gazettal of draft variations will be required; a new designation needs to be in place before this consultation can occur. A detailed discussion of the effect of recent industry developments on the current eftpos regulatory regime and the options for future regulation will be set out in a consultation document to be released by the Bank later in the year.

Footnote

he Bank indicated in its September 2011 media release that multilateral interchange fee provisions would not be part of the review: see Reserve Bank of Australia (2011), ‘Payments System Issues’, Media Release No 2011-18, 2 September. These provisions will only be considered to the extent that ongoing regulation may no longer be necessary; there will be no reconsideration of the level of the multilateral interchange fee benchmark as part of the broader review. [7]