Sydney, 27 August, 2002: The Australian Bankers’ Association (ABA) supports constructive reform of the retail payments system to achieve greater efficiency to benefit consumers and industry participants. 

As the Reserve Bank of Australia (RBA) has previously commented, for reform to be effective it will need to address the relative pricing of the competing retail payments instruments including credit cards and debit cards (EFTPOS).  The ABA supports simultaneous reform of credit cards and debit cards (EFTPOS). 

Work is underway by industry participants with RBA involvement in relation to ATM and debit card (EFTPOS) interchange.  RBA credit card regulations announced today are one part of this process of reform of the retail payments system. 

Given that the RBA is looking to these regulations to reduce the costs paid by the community for the retail payments system, it is critical that the RBA outlines clear performance benchmarks for its regulatory regime and reviews them regularly. The ABA encourages the RBA to prepare an active information program about its changes to the credit card system, so that consumers fully understand the potential effects on their credit cards.

David Bell, Chief Executive of the ABA, said “Consumers like credit cards because they are a low-cost, convenient and safe means of paying for goods and services and for arranging their finances.”

“Small businesses also value credit cards because they allow small business to compete with large retailers in offering their customers credit payment facilities.”

Credit Card Interchange Fee

The RBA’s proposal to regulate interchange fees will significantly reduce the current level of the fee due to the exclusion from eligible costs of certain costs the ABA considers to be legitimately paid for by merchants. The precise wholesale interchange fees will not be determined until the credit card schemes have undertaken the necessary cost studies and processes.

In turn, banks will not be able to determine the full effect of the reduced interchange fees until this happens.

No-surcharge rule

The ABA supports the RBA’s commitment to preserving competitive neutrality, with respect to merchant pricing, by ensuring competitors AMEX and Diners’ Club also abolish their no-surcharge rules.

Access Regime

The ABA supports the principle that entities should have the maximum opportunity to participate in credit card issuing and acquiring, subject to prudential controls satisfactory to regulators, the relevant scheme and its members.  The ABA and member banks look forward to consulting with the Australian Prudential Regulation Authority (APRA) on the new benchmarks.

Timing and scope of reform implementation

Timing of implementation is important to allow financial institutions to plan ahead, change systems and review product offerings to ensure consumers and merchants get the best possible outcomes stemming from the RBA’s reforms.

On the scope of reform, the ABA endorses the RBA’s view that credit and debit reforms should ideally be introduced simultaneously. This would minimise disruption and pricing distortions and therefore lead to an orderly process of change for consumers and merchants.

For further information contact:

Heather Wellard
ABA PR
Phone: 02 8298 0411
Mobile: 0409 830 439

ENDS