Media Release Payments System Reform

1.The ATM system

Following a decision by the Payments System Board, the Reserve Bank is today designating the Australian ATM system and releasing a consultation document that sets out a draft Access Regime.

This decision comes after many years of industry-based efforts, supported by the Bank, to improve competition and efficiency in the ATM system. As a result of this work, the industry has agreed to a reform package which will come into effect on 3 March 2009. The key elements of this package include:

  • the abolition of bilateral interchange fees paid by financial institutions to ATM owners for the provision of ATM services. These fees – which average around $1 per transaction – are neither transparent to customers nor subject to the normal forces of competition;
  • providing ATM owners with the ability to directly charge cardholders for ATM withdrawals, with any charge clearly shown before the customer proceeds with the withdrawal; and
  • the introduction of an objective and transparent Access Code by the Australian Payments Clearing Association (APCA), setting out the conditions that new entrants are required to meet, the rights of new entrants, and the requirements on current participants in dealing with new entrants.

This package will deliver significant benefits to consumers including:

  • making the cost of cash withdrawals more transparent to cardholders and placing downward pressure on the cost of ATM withdrawals;
  • helping to ensure that there is continued widespread availability of ATMs by creating incentives to deploy ATMs in a wide variety of locations and therefore providing consumers with choice and convenience. Without a change in the current arrangements, the number of ATMs is likely to decline over time as non-bank deployers find it uneconomic to install and maintain ATMs;
  • promoting competition between financial institutions; and
  • making access less complicated for new entrants and therefore strengthening competition.

The reforms do not compel ATM owners to directly charge customers for use of ATMs. As is the case currently, most customers will not be charged for use of their own financial institution's ATMs and many small financial institutions have entered into arrangements with larger networks to provide fee-free access to ATMs for their customers. Furthermore, financial institutions may choose to rebate their customers for any charges levied by ATM owners.

These reforms will lead to a significant change to the pricing of ATM transactions, with customers now being directly charged for ATM withdrawals by the ATM owner.  Given this change, the Bank no longer sees a case for financial institutions to charge ‘foreign’ fees when their cardholders use an ATM owned by another institution, particularly given that most financial institutions now provide transaction accounts which offer unlimited electronic transactions for a monthly fee.  This shift to cardholders paying the ATM owner, rather than their own financial institution, will improve the transparency of fees and competition within the system.

The Board had hoped that the industry could implement this reform package without regulation by the Bank. For many years, the industry had argued that regulation was not needed, and that an industry-based solution could be found. However, the industry recently wrote to the Bank requesting that it use its powers to provide legal certainty to aspects of the reforms.

While most of the package will be implemented through the industry Access Code, the Board is proposing to use an Access Regime to set bilateral interchange fees to zero and to cap the fee that existing institutions can charge new entrants for establishing the necessary direct connections.

While the Board supports the current reform package it nevertheless sees a need for more fundamental reform of the architecture of both the ATM system and the EFTPOS system. In particular, the bilateral nature of these systems means that potential new entrants need to establish connections with each of the existing participants, rather than being able to join the systems through a single point of access. The Board notes that the current technology underpinning the ATM and EFTPOS systems will need to be updated over the next year or so. This provides an opportunity for the industry to improve the architecture of these systems in a way that promotes efficiency and supports more open access.  If the industry does not make substantive progress in this direction by March 2010, the Board will consider taking a more active role, perhaps through setting technical standards or using its own operations in the payments system to facilitate reform.

Submissions on the draft Access Regime should be sent by 16 January 2009 to:

Head of Payments Policy Department
Reserve Bank of Australia
GPO Box 3947


Submissions will be published on the Bank's website and those making submissions will have the opportunity to discuss them with the Bank.

2. Variation to Interchange Fee Standards for Credit and Debit Cards

The Board has also decided to vary the interchange fee Standards for the MasterCard and Visa credit card systems, the Visa Debit system and the EFTPOS system to allow the Bank to waive or suspend the requirement to recalculate the benchmarks for interchange fees. In addition, it has decided to waive the requirement for benchmark recalculations in 2009.

The current interchange fee Standards for the credit card, Visa Debit and EFTPOS systems require interchange fees to be set with respect to benchmarks established through regular cost studies. The most recent cost studies were undertaken in 2006 and the Standards currently require these studies to be updated in 2009. Given the possibility of a change to the regulatory environment, as outlined in the Final Conclusions of the review of the payments system reforms, the Board has decided that the industry should not be required to proceed with new cost studies and is, therefore, varying the relevant interchange fee Standards to allow the Bank to waive the requirements. Once the variation is in place, the Board has approved a waiver for the 2009 benchmark recalculation, which the Bank will publish on its website.

3. No-surcharge rules in PayPal

The Bank is continuing to hold discussions with PayPal regarding merchant restrictions, including its no-surcharge rule. The Board will consider this matter again at its February meeting.


Philip Lowe
Assistant Governor (Financial System)
Reserve Bank of Australia

Phone: +61 2 9551 8510

Michele Bullock
Head of Payments Policy Department
Reserve Bank of Australia

Phone: +61 2 9551 8710

Manager, Media Office
Information Department
Reserve Bank of Australia

Phone:+61 2 9551 9720
Fax:+61 2 9551 8033