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 interchange fees on domestic debit card and prepaid cards acquired in Australia to a weighted average of 8 cents per transaction, with a ceiling on individual interchange rates of 8 cents or 0.16 per cent if specified in percentage terms
• 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)
• increase transparency of interchange and scheme fees by requiring the designated debit and prepaid card systems to publish fee information on a quarterly basis
• cap interchange fees on foreign-issued debit and prepaid cards acquired in Australia at a maximum of 1.0 per cent of transaction value from 1 April 2027.

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.

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.