Reform of the EFTPOS and Visa Debit Systems in Australia:
Final Reforms and Regulation Impact Statement – April 2006
5. The Bank's Proposed Standards and Access Regime

The Payment Systems (Regulation) Act 1998 requires the Reserve Bank to publish a draft Standard (or Access Regime) for public consultation before the Standard (or Access Regime) is finalised. Accordingly, in February and December 2005 the Bank released a number of proposals for public comment, designed to address the four issues discussed above. The Bank's reasoning is set out extensively in the accompanying Consultation Documents as well as in a document setting out its reasons for designating the EFTPOS system.[10]

In the February 2005 Consultation Document, the Bank proposed interchange Standards for both the EFTPOS and Visa Debit systems. The proposed EFTPOS Standard would reduce interchange fees from their current average of around 20 cents, to a maximum of around 5 cents, with the fee remaining payable by issuers to acquirers. The Visa Debit Standard would see interchange fees fall from a percentage-based fee (around 0.55 per cent of the transaction value), averaging around 40 cents, to a flat fee of around 15 cents. If these reforms were implemented, the difference in the interchange fees in the two systems for a transaction of average size would fall from around 60 cents to around 20 cents.

Following comments on the draft EFTPOS interchange Standard and the industry work on access, the Bank proposed a change to the EFTPOS Standard in December 2005. Under the revised draft Standard, the interchange fee would be subject to the same cap, but it would also be subject to a floor of 80 per cent of the cap. This change was in response to concerns from some in the industry that the beneficial effects of access reform could be undermined by negotiations over interchange fees. By introducing a floor, the revised draft Standard would constrain interchange fees to a relatively narrow range, limiting this possibility.

The February 2005 Consultation Document also proposed a Standard requiring the Visa system to remove the honour all cards rule and to ensure that Visa Debit cards were visually and electronically identifiable.

The issue of access to the EFTPOS system was addressed in the December 2005 Consultation Document, with the Bank proposing that an Access Regime be imposed on the system. This followed extensive work by APCA in developing an Access Code for the EFTPOS system. This Code contains detailed provisions under which existing participants in the EFTPOS system agree to provide connections to new and existing participants. These provisions have been discussed extensively with the Bank. While the Access Code does not set a price of connection, APCA's members agreed to the Bank's proposal to set a cap on this price equal to the estimated incremental direct cost that would be incurred by the most efficient existing participant providing direct connections (which, from a 2004 survey conducted by APCA, is $78,000). Following this agreement, APCA wrote to the Bank asking it to give consideration to imposing the cap under the Payment Systems (Regulation) Act 1998. The proposed Access Regime would do this.

The Access Regime also includes ‘no discrimination' provisions which would ensure that new entrants are offered interchange fees that do not place them at a competitive disadvantage relative to existing participants.


Reserve Bank of Australia, 2004, 2005a and 2005c. [10]