Australian Central Bank Remains Reluctant Regulator Of Electronic Payments System

Post by NeilMc on March 15, 2010 · Under Business News, Debit Cards, banking, credit cards · Comment

The Australian central bank, The Reserve bank of Australia (RBA) says it remains a “reluctant regulator” of competition in the electronic card payments system space. The RBA says it prefers competition as the mechanism used to contain fees, and would like to take a step back instead, however RBA assistant governor Malcolm Edey says it is not quite ready to do so.

The central bank has reviewed competition within the electronic fund transfer space for quite some time now, and is particularly interested in interchange fees, fees that are applied to credit and debit cards.

“We’d prefer to see fees being held down by competition than by direct regulation. We believe there’s been good progress in promoting competition over recent years, but it’s not yet clear whether that will be sufficient.” Mr. Edey told the Cards & Payments Australasia 2010 Conference today.

Mr. Edey says he could not comment or indicate to the sector, whether the central bank’s position would change in the immediate future.

Currently the industry is overseen by the Payments System Board, which is chaired by RBA governor Glenn Stevens.

“I know that many of you involved in the industry would like me to give some predictions or clues about what the board’s next decision on these matters might be. I’m not in a position to make that kind of prediction today.” Mr. Edey said.

In 2008 the RBA undertook a review, the results of which suggest that reforms of the system had delivered the benefits of lower cost to merchants and enhanced competition. The review also suggested however that there was a need for further improvement.

“The first possible approach would be to step back from interchange-fee regulation, if it could be reasonably satisfied that this was not going to result in the fees going back up again,” he said.

In August 2009, the central bank deferred its decision on additional reform, stating that it preferred allowing additional time to see whether competition would result in changes in the industry automatically.

Mr. Edey said that the market for charge and credit cards was extremely concentrated, and cited the fact that just two credit card schemes constitute more 80 per cent of all transactions.

“One of the consequences of the industry structure that I’ve just described is that competitive discipline on interchange fees has been weak,” he said.

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