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Review of the Regulatory Framework for the EFTPOS System: Consultation on Options for Reform – June 2012 Attachment 3 Draft Access Regime

Access Regime for the EFTPOS System

Objective

The objective of this Access Regime is to promote competition and efficiency in the Australian payments system, having regard to:

  1. the interests of current participants in the EFTPOS system;
  2. the interests of people who, in the future, may want access to the EFTPOS system;
  3. the public interest; and
  4. the financial stability of the EFTPOS system.

Application

  1. This Access Regime is imposed under Section 12 of the Payment Systems (Regulation) Act 1998.
  2. This Access Regime applies to the payment system operated within Australia known as the EFTPOS system, which was designated as a payment system on 9 September 2004 12 June 2012 and is referred to in this Access Regime below as the EFTPOS system.

  3. In this Access Regime:

    ‘Access Agreement’ has the same meaning as in the EFTPOS Access Code;

    ‘Access Charge’ means the charge payable by an Access Seeker to an Access Provider under an Access Agreement as described in clause 3 of Schedule 3 of the EFTPOS Access Code;

    ‘access’ means a direct communications link between two Members for the purposes of exchanging payment instructions and related messages in respect of their own activities as an EFTPOS Issuer and/or EFTPOS Acquirer and/or exchanging payment instructions and related messages on behalf of other EFTPOS Issuers or EFTPOS Acquirers, to facilitate the Clearing and Settlement of EFTPOS Transactions;

    ‘Access Provider’ has the same meaning as in the EFTPOS Access Code;

    ‘Access Seeker’ has the same meaning as in the EFTPOS Access Code;

    ‘access service’ means a service of facilitating or arranging for access;

    an ‘acquirer’ is a participant in the EFTPOS system that provides services to a merchant to allow that merchant to accept a debit card;

    ‘APCA’ means the Australian Payments Clearing Association Limited (ABN 12 055 136 519);

    ‘APCA's 2004 costs survey’ is the survey of Direct Connectors in the EFTPOS system, conducted by APCA, on the estimated incremental direct costs of access connecting new Direct Connectors, the results of which were supplied to the Reserve Bank of Australia on 15 April 2005;

    ‘Bilateral Agreement’ has the meaning given in the EFTPOS Scheme Rules and also includes any other agreement permitted under the EFTPOS Scheme Rules between two or more Members to pay or receive interchange fees that vary from those specified by the Company as payable between Members;

    a ‘bilateral interchange fee’ is an interchange fee that is agreed between two or more Members under a Bilateral Agreement for payment solely between those Members in relation to EFTPOS Transactions;

    ‘cash out’ means the provision of cash to a cardholder by a merchant, as a result of a debit card transaction at the merchant;

    ‘debit card’ means a card issued by a participant in the EFTPOS system that allows the cardholder to make payments to merchants for goods or services and/or obtain cash out using the EFTPOS system by accessing a deposit account held at an authorised deposit-taking institution;

    ‘debit card transaction’ or ‘transaction’ means a transaction in Australia using the EFTPOS system;

    ‘Direct Connector’ has the same meaning as in the EFTPOS Access Code;

    ‘EFTPOS Access Code’ means the EFTPOS Access Code adopted by EFTPOS Access Australia Limited [ABN 99 119 811 344] on 8 September 2006 and as varied from time to time;

    ‘Clearing’ means the process of transmission, authorisation and reconciliation of payment instructions between EFTPOS Issuers and EFTPOS Acquirers arising out of EFTPOS Transactions;

    ‘Company’ means EFTPOS Payments Australia Limited (ABN 37 136 180 366);

    ‘EFTPOS Acquirer’ has the same meaning as in the EFTPOS Scheme Rules;

    ‘EFTPOS Issuer’ has the same meaning as in the EFTPOS Scheme Rules;

    ‘EFTPOS Scheme Rules’ are the rules promulgated under the constitution of the Company;

    ‘EFTPOS Transaction’ has the same meaning as in the EFTPOS Scheme Rules;

    ‘financial year’ is a 12-month period ending 30 June;

    an ‘interchange fee’ is a wholesale fee which is payable between an EFTPOS Issuer issuer and an EFTPOS Acquirer acquirer or self-acquirer Self Acquirer, directly or indirectly, in relation to an EFTPOS Transaction a debit card transaction in the EFTPOS system;

    an ‘issuer’ is a participant in the EFTPOS system that issues debit cards to its customers;

    ‘Member’ means a member of the Company;

    ‘merchant’ means a merchant in Australia that accepts a debit card for payment for goods or services and/or that provides cash out;

    a ‘self-acquirer’ is a participant in the EFTPOS system that is a merchant that sends transactions directly to issuers rather than through an acquirer and takes on the responsibilities usually undertaken by an acquirer;

    ‘Self Acquirer’ has the same meaning as in the EFTPOS Scheme Rules;

    ‘Settlement’ means the process of discharging payment obligations between an EFTPOS Issuer and an EFTPOS Acquirer arising from EFTPOS Transactions;

    ‘Standard Service’ has the same meaning as in the EFTPOS Access Code;

    terms defined in the Payment Systems (Regulation) Act 1998 have the same meaning in this Access Regime.

  4. Each Member participant in the EFTPOS system must do all things necessary on its part to ensure compliance with this Access Regime.
  5. If any part of this Access Regime is invalid, it is ineffective only to the extent of such part without invalidating the remaining parts of this Access Regime.
  6. This Access Regime is to be interpreted:
    • in accordance with its objective; and
    • by looking beyond form to substance.
  7. This Access Regime comes into force on 13 September 2006 [           ] and is current as at that date.

Price of access

  1. The Access Charge levied by an Access Provider for providing the Standard Service to an Access Seeker Any charge or fee levied by a Member for a new access service must not exceed the benchmark, calculated in accordance with paragraphs 9 to 16 below, applying on the date the Access Agreement is entered into on which the Member enters into an agreement relating to that access service.

Methodology for calculation of the Aaccess Ccharge benchmark

  1. For the period from [         ] 13 September 2006 to 31 December 2009 to 1 July 2013 the benchmark for the Access a C charge or fee for access services in the EFTPOS system is the lowest estimated cost for providing a direct connection as measured in APCA's 2004 costs survey, adjusted for movements in the Consumer Price Index between the June quarter of 2005 and the June quarter of 2009. This cost is $78,000 (excluding GST).
  2. A new benchmark will apply from 1 January 2010 July 2013, and every four years thereafter, determined in accordance with paragraphs 11 to 16 below.
  3. In a the final financial year of application of a given benchmark, to be known as the ‘re-calculation year’, all providers of access services Access Providers in the EFTPOS system who have provided the Standard Service access services to one or more Members an Access Seeker during the four years to 30 June 31 December of that year must complete a survey of the eligible costs they incurred in providing the service to each such Member Access Seeker. For the first benchmark applying from 1 July 2013, this four-year period is from 1 January 2009 to 31 December 2012.
  4. The form of the survey, including the set of assumptions, is to be substantively the same as APCA's 2004 costs survey, with any variations to must be approved by the Reserve Bank of Australia prior to the survey being undertaken. Eligible costs are to be specified in the survey, and must be only incremental direct costs incurred in providing access services the Standard Service. Providers of access services Access Providers may appoint an agent to co-ordinate this survey.
  5. Providers of access services Access Providers must use data on eligible costs drawn from accounting records prepared in accordance with generally accepted accounting principles and Australian equivalents to International Financial Reporting Standards. Where a provider of access services an Access Provider has provided access services the Standard Service to more than one Member seeking access services Access Seeker during the four years to 30 June 31 December of in the re-calculation year, it must provide separate data on the costs incurred in providing access services each Standard Service. Each such provision of data counts as a separate survey response for the purposes of paragraph 16.
  6. Results of the survey are to be provided by each provider of access services Access Provider to the Reserve Bank of Australia on a confidential basis by 15 August 15 February of the re-calculation year, unless an extension of this deadline is agreed to in writing by the Reserve Bank of Australia.
  7. Each provider of access services Access Provider may be required by the Reserve Bank of Australia to explain information in its survey responses. The Reserve Bank of Australia will review the data from each provider of access services Access Provider to determine if the costs included are eligible costs and the Reserve Bank of Australia will use only eligible costs to calculate the benchmark in accordance with paragraph 16 below.
  8. The Reserve Bank of Australia will calculate the new benchmark to apply for the four-year period commencing 1 January July of the financial year following the re-calculation year. If the Reserve Bank of Australia receives survey responses from three or more different providers of access services Access Providers, the new benchmark is to be the lowest actual cost for provision of access services the Standard Service from among all survey responses. If the Reserve Bank of Australia receives survey responses from fewer than three different providers of access services Access Providers, the new benchmark is to be the lower of:
    1. the lowest actual cost for provision of access services the Standard Service from among all survey responses; and
    2. the benchmark applying during the re-calculation year adjusted for the change in the Australian Consumer Price Index between the June December quarter of that year and the June December quarter of four years earlier.

Transparency

  1. The Reserve Bank of Australia will publish the new benchmark by no later than 30 September 31 March of the re-calculation year (that is, not less than three months before the new benchmark is due to take effect).

No discrimination

  1. 18. An acquirer or self-acquirer who becomes a participant in the EFTPOS system for the first time, on or after 13 September 2006, is for three years entitled to receive an interchange fee from an issuer with whom it has an Access Agreement no less than the lowest interchange fee payable by that issuer to an existing acquirer or self-acquirer.
  2. 19. An issuer who becomes a participant in the EFTPOS system for the first time, on or after 13 September 2006, is for three years not required to pay an acquirer or self-acquirer with whom it has an Access Agreement an interchange fee greater than the highest interchange fee payable by an existing issuer to that acquirer or self-acquirer.
  3. 18. For the purposes of paragraphs 19 and 20, if no interchange fee is payable under a Bilateral Agreement, this fee arrangement is to be considered as a zero interchange fee payable by an EFTPOS Acquirer or Self Acquirer to an EFTPOS Issuer.
  4. 19. For a period of three years from the date on which a person becomes an EFTPOS Acquirer or Self Acquirer for the first time (the New EFTPOS Acquirer or Self Acquirer), the New EFTPOS Acquirer or Self Acquirer is entitled to establish a bilateral interchange fee with an EFTPOS Issuer, subject to the following paragraphs (i), (ii) and (iii).
    1. i. If the New EFTPOS Acquirer or Self Acquirer seeks to negotiate payment of a bilateral interchange fee to the EFTPOS Issuer, that fee must not exceed the largest bilateral interchange fee that any other EFTPOS Acquirer or Self Acquirer pays to the EFTPOS Issuer.
    2. ii. Subject to paragraph (iii), if the New EFTPOS Acquirer or Self Acquirer seeks to negotiate to receive a bilateral interchange fee from an EFTPOS Issuer, that fee must not be less than the smallest bilateral interchange fee that any other EFTPOS Acquirer or Self Acquirer receives from the EFTPOS Issuer.
    3. iii. If the EFTPOS Issuer both pays and receives bilateral interchange fees, the EFTPOS Issuer is not obliged to pay a bilateral interchange fee to the New EFTPOS Acquirer or Self Acquirer.
  5. 20. For a period of three years from the date on which a person becomes an EFTPOS Issuer for the first time (the New EFTPOS Issuer), the New EFTPOS Issuer is entitled to establish a bilateral interchange fee with an EFTPOS Acquirer or Self Acquirer, subject to the following paragraphs (i), (ii) and (iii).
    1. i. Subject to paragraph (iii), if the New EFTPOS Issuer seeks to negotiate to receive a bilateral interchange fee from the EFTPOS Acquirer or Self Acquirer, that fee must not be less than the smallest bilateral interchange fee that any other EFTPOS Issuer receives from that EFTPOS Acquirer or Self Acquirer.
    2. ii. If the New EFTPOS Issuer seeks to negotiate to pay a bilateral interchange fee to the EFTPOS Acquirer or Self Acquirer, that fee must not exceed the largest bilateral interchange fee that any other EFTPOS Issuer pays to that EFTPOS Acquirer or Self Acquirer.
    3. iii. If the EFTPOS Acquirer or Self Acquirer both pays and receives bilateral interchange fees, the EFTPOS Acquirer or Self Acquirer is not obliged to pay a bilateral interchange fee to the New EFTPOS Issuer.