The Australian Debit Card Market: Default Settings and Tokenisation – Conclusions Paper
September 2023 1. Executive Summary

This paper sets out the conclusions of the Reserve Bank of Australia’s recent public consultation on options for further enhancing the competitiveness, efficiency and safety of Australia’s debit card market. In June 2023 the Bank published an Issues Paper: ‘The Australian Debit Card Market: Default Settings and Tokenisation’, which covered two sets of issues:

1. The practice of a default routing network being set for dual-network debit cards (DNDCs), particularly through ‘priority’ network settings on card chips.^[1]
2. The tokenisation of debit cards for the purpose of conducting online transactions.

This paper provides a summary of the two issues, the options proposed by the Bank to address them, stakeholder feedback, and the Payments System Board’s conclusions. The Board’s key conclusions are outlined below.

Setting a default network on DNDCs

• The Board decided that it will not continue to explore prohibiting the setting of a default routing network on DNDCs. Stakeholders’ feedback indicated that any benefits from such a prohibition would likely be outweighed by the costs and risks involved. Prohibiting the setting of a priority network would be costly as it would require all DNDCs to be reissued. There would also be the risk of failed transactions, particularly for overseas transactions and for certain types of transactions in Australia, including those made at legacy terminals.
• The Board, however, remains strongly supportive of merchants having the ability to choose their preferred debit card network through least-cost routing (LCR). The Board expects acquirers, payment facilitators, and gateways (‘providers’) to make faster progress on enabling LCR for merchants that could benefit from it. If providers do not make substantial progress in enabling LCR for more merchants by June 2024, the Bank will explore imposing a formal regulatory requirement on providers to enable LCR for their merchants. Going forward, the Board also expects the industry to implement new form factors in a way that is compatible with LCR from the outset.

Tokenisation of DNDCs and other cards

• There was broad support among stakeholders for the industry to explore introducing more standardisation for tokenisation. Accordingly, the Board decided that following further consultation with industry, the Bank will endeavour to publish high-level expectations on the tokenisation of payment cards by the end of 2023. The Bank has asked the Australian Payments Network (AusPayNet) to coordinate the industry’s work to meet the Bank’s expectations and to draft more specific tokenisation standards if required. The Bank will work with AusPayNet and industry to put in place governance arrangements for this work so that all stakeholders’ views are considered in formulating the industry response.
• The Bank welcomes feedback on the draft expectations included in Appendix A, and the extent to which prepaid and charge cards should be covered by the expectations.