RESERVE BANK INVOLVEMENT SUPPORTED BY BANKS Sydney, 12 April, 2001; The Australian Bankers’ Association (ABA) today supported the involvement of the Reserve Bank of Australia (RBA) which used its powers of designation as a first step to the potential reform of interchange arrangements for Australia’s credit card system. ABA Chief Executive, Mr David Bell, said the Reserve Bank’s primary concern for the public interest should provide a safeguard to the reform of a system which was low cost, enjoyed strong public confidence and popular support. "Australia’s secure payments system has been developed over many years by the banks, building societies and credit unions and is a world leader for competition, low cost and public confidence in the security of customers’ financial transactions," Mr Bell said. Mr Bell said the ABA has already made a submission to the Reserve Bank on behalf of seven banks, which had proposed a range of reforms in discussions with the Australian Competition and Consumer Commission. Mr Bell said the ABA submission on behalf of the banks had identified four public interest concerns for consideration in the review process. The reforms being considered should: Benefit consumers ­ so that any savings from lower interchange fees flow back to consumers rather than being retained by merchants and retailers; Maintain a level playing field for all credit card schemes ­ so that open card schemes (such as Visa, MasterCard, Bankcard) compete evenly with closed card schemes (such as Diners’ Club and American Express) and that issuer banks, building societies and credit unions can also compete evenly. The ABA notes that the RBA’s Payment System Board will take into account the competitive dynamics of the industry in any decisions it takes. Ensure efficiency and innovation in payments systems ­ by ensuring there is an adequate return on investment so that the Australian secure payments system is maintained at a world class level; and, Not inadvertently lead to financial instability ­ regulation should be the minimum necessary but provide maximum certainty; there should be no unjustified reduction in the level of regulatory (prudential) supervision of the bodies which issue cards and manage transactions on behalf of consumers and merchants through the electronic payments system. "The secure payments system is vital for Australia’s economic stability and will provide the backbone for future growth and economic efficiency through e-commerce in the digital age," Mr Bell said. "The ABA is concerned to ensure that any reform of interchange arrangements does not reduce competition by preventing many of the smaller regional banks, building societies and credit unions from issuing credit cards. "Consumers highly value credit cards for personal convenience, to manage personal finances and for insurance protection in the event that services purchased are not delivered. "Small and medium sized merchants and trades people also rely on the credit card payment system to out-source to the banks their credit risks because payments are guaranteed by their banks. Small businesses also avoid the costs and problems associated with handling cash and cheques, "Mr Bell said. Background: The ABA submission to the Reserve Bank of Australia was on behalf of: Australia & New Zealand Banking Group Limited Bank of Queensland Limited Bank of Western Australia Limited Commonwealth Bank of Australia National Australia Bank Limited St George Bank Limited Westpac Banking Corporation Limited For further information contact: Heather Wellard ABA PR Phone: 02 8298 0411 Mobile: 0409 830 439     ENDS