Credit Cards Regulatory Framework

Overview

In line with its approach to regulation, since the early 2000s the Bank has introduced a number of reforms which have regulated limited elements of designated credit and debit card systems, with the aim of improving the efficiency of the Australian payments system and promoting competition in the provision of payment services.

In short, the current credit card regulations:

  • cap credit card interchange fees to a weighted average of 0.50 per cent of transaction value, with a ceiling on individual interchange rates of 0.80 per cent
  • remove restrictions so that merchants can pass on card acceptance costs to cardholders in the form of a surcharge
  • remove restrictions that require merchants to accept the debit cards of a scheme if they accept that scheme’s credit cards and vice versa (through written Undertakings by MasterCard and Visa)
  • reduce barriers to entry through Access Regimes which help increase participation in payment systems.

Together the regulations have increased transparency and promoted more efficient price signals, thereby improving payment choices and contributing to a more efficient payments system overall. They have also improved competition by removing restrictions on merchants and liberalising access to systems.

Review of Card Payments Regulation

During 2015 and 2016, the Bank undertook a review of the regulatory framework for card payments. As part of this process the Bank released an Issues Paper in March 2015 that noted some developments in the payments system that raised concerns given the Bank’s mandate to promote competition and efficiency in the payments system. In December 2015 the Bank released a Consultation Document outlining proposed changes to the standards for card payment systems. The Conclusions to the Review of Card Payments Regulation were published in May 2016, following an extensive process of consultation.

The new interchange benchmarks, which took effect on 1 July 2017, introduced a ceiling on individual interchange rates of 0.80 per cent. The weighted-average benchmark for credit card transactions has been maintained at 0.50 per cent. Compliance with the benchmark is observed quarterly. To address issues of competitive neutrality, interchange-like payments to issuers in the American Express companion card system are subject to equivalent regulation to that applying to the MasterCard and Visa credit card systems. More broadly, to prevent circumvention of the interchange standards, there are limits on any scheme payments to issuers that are not captured within the interchange benchmarks.

See Media Release and some Q&A for further details.

More information

For details of credit card regulations, including designations of systems, standards, access regimes, interchange fee benchmarks and voluntary undertakings see: ‘Regulations’. Information about consultations and regulatory decisions made in relation to the credit card system can be found here: 'Consultations' and ‘Regulatory Decisions

Several resources are available that summarise credit and debit card regulations. For instance, see: A Guide to the Card Payments System Reforms, RBA Bulletin, September 2010 for a guide to earlier reforms. More recently, the Bank's 2014 submission to the Financial System Inquiry (Chapter 8) and the Bank's March 2015 Issues Paper provide detailed descriptions of the rationale for, and evolution of card payments regulation in Australia since the early 2000s.