Debit and Prepaid 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 debit and credit 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 debit card and prepaid card regulations:
- cap debit card and prepaid card interchange fees to a weighted average of 8 cents per transaction, with a ceiling on individual interchange rates of 10 cents or 0.20 per cent if specified in percentage terms
- 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).
The Bank has also explicitly stated that it expects large and medium-sized card issuers to issue ‘dual-network’ debit cards (DNDCs), which allow domestic debit payments to be processed by one of the two networks positioned on the card. In addition, the Bank expects the payments industry to provide ‘least-cost routing’ (LCR) functionality to merchants. For more detail on DNDCs and LCR, see Least-cost Routing of Debit Card Transactions.
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 supporting their ability to choose the lowest-cost debit network.
Since the card payment reforms in the early 2000s, the Bank has periodically reviewed its retail payments regulations. The most recent Review of Merchant Card Payment Costs and Surcharging took place over 2024-26 and the Bank released a Conclusions Paper in March 2026 following an extensive public consultation process. The Bank amended its Standards, which implement the following changes:
- From 1 October 2026, interchange fees on debit and prepaid cards will be subject to a maximum cap at 0.16 per cent of transaction value or 8 cents per transaction. The weighted-average benchmark will remain at 8 cents.
- From 1 October 2026, designated debit and prepaid card systems will no longer be prohibited from imposing ‘no-surcharge’ rules.
- From 1 October 2026, designated debit and prepaid card systems will be required to publish information about their interchange and scheme fees on a quarterly basis.
- From 1 April 2027, interchange fees on foreign-issued debit and prepaid cards will be subject to a maximum cap of 1.0 per cent of transaction value.
The Bank’s Payments System Board has determined that these regulatory actions would together best support the public interest in line with its responsibility to promote the efficiency and competitiveness of the payments system and control risk in the financial system.