Media Release Reform of Credit Card Schemes in Australia

Following a decision by the Payments System Board, the Reserve Bank of Australia has today released its final reforms to credit card schemes in Australia. These reforms have been developed over a three-year period during which there has been extensive consultation with a wide range of interested parties.

The reform measures involve:

  • the adoption of an objective, transparent and cost-based benchmark which will be used as a basis for determining interchange fees in credit card schemes. Interchange fees are the fees paid to financial institutions which issue credit cards by financial institutions which provide services to merchants; these fees, in turn, are passed onto merchants and then into the prices of goods and services faced by consumers;
  • the end of the restriction imposed by credit card schemes which prevents merchants from recovering from cardholders the costs of accepting credit cards; and
  • the end of the restriction imposed by credit card schemes which limits the entry of new competitors into the schemes. Specialist credit card institutions authorised and supervised by the Australian Prudential Regulation Authority (APRA) will be eligible to apply to participate in the credit card schemes.

In announcing the reform measures, the Governor of the Reserve Bank, Mr Ian Macfarlane, said: “The Payments System Board has endorsed a balanced set of reforms which will ensure that normal market mechanisms work in a more transparent and effective way in the Australian payments system, to the benefit of the Australian community as a whole. The reforms will reduce the size of the transfer from the community to financial institutions for credit card usage and will, over time, promote genuine competition on credit card interest rates and on the merchant service fees charged to merchants. At the same time, the reforms leave the basic structure of the credit card product intact and acknowledge the importance of maintaining the safety of credit card schemes in Australia.”

The cost-based benchmark for each credit card scheme, which sets a ceiling on average interchange fees in the scheme, will be applied by scheme members. Based on recent information provided to the Reserve Bank by each of the four major banks, average interchange fees in Australia are expected to fall from around 0.95 per cent of the value of each credit card transaction at present to around 0.55–0.6 per cent in the second half of 2003 – a reduction of around 40 per cent. The reduction in interchange fees will result in lower merchant service fees which will, in turn, pass through to the community in the general level of prices.

The reform measures will apply to the credit card schemes operated in Australia by Bankcard, MasterCard and Visa, which were formally “designated” by the Reserve Bank as payment systems subject to its regulation under the Payment Systems (Regulation) Act 1998. American Express and Diners Club have each given an undertaking to the Reserve Bank that they will also remove their restrictions on merchant pricing.

The Reserve Bank's standard on merchant pricing will come into force on 1 January 2003 and its standard on interchange fees on 1 July 2003. The access regime will come into force once APRA has finalised its prudential standards for specialist credit card institutions, expected by the end of 2002. Further details of the reform measures and their implementation schedule are provided in the Regulation Impact Statement, which is available at the Reserve Bank and on its website (

Regulations under the Payment Systems (Regulation) Act 1998 will be prepared so that participants in the designated credit card schemes complying with the standard on interchange fees will not require authorisation under the Trade Practices Act 1974. This is consistent with the Memorandum of Understanding between the Reserve Bank and the Australian Competition and Consumer Commission.


Dr John Laker
Assistant Governor
(Financial System)
Reserve Bank of Australia
(02) 9551 8510

Dr John Veale
Head of Payments Policy
Reserve Bank of Australia
(02) 9551 8710

Manager, Media Office
Reserve Bank of Australia
(02) 9551 9720