Reform of Australia's Payments System Appendix 2: Examples of Commitments on Interchange Fees

Section 6.1.5 raised the possibility of the schemes making a public commitment on the level of credit card interchange fees. The Board has no particular view at this stage on the form of this commitment, other than it should be competitively neutral and provide comfort that average interchange fees would not rise from current levels.

One possibility would be to effectively reproduce the current credit card interchange fee Standard in a less legalistic manner. Such a commitment might read as follows:

[] agrees that on 1 November 2009 and every [third] year thereafter, the weighted average of credit card interchange fees in Australia will not exceed 50 basis points. If interchange fees on credit cards are introduced, varied or removed between these periods, [] agrees that the new weighted average will not exceed 50 basis points. The weighted average is calculated by dividing the total interchange revenue that would have been payable on credit card transactions in Australia had the interchange fees implemented on that date been applicable in the previous financial year, by the total value of Australian domestic credit card transactions in that financial year. [] agrees to publish its Australian interchange fees on its website. In addition [] agrees to publish its actual weighted-average interchange fee on credit card transactions quarterly, no later than 30 days after the end of the quarter.

This drafting is quite complex, reflecting the fact that it is based on a legal standard and the current arrangements for calculating the weighted-average interchange fee for compliance purposes. Another simpler possibility might be to base a commitment around the actual weighted-average interchange fee which is directly observable by the schemes. For example, it might read:

[] agrees that each quarter, no later than 30 days after the end of the quarter, it will publish data on the average credit card interchange fee for that quarter. [] further agrees that the average credit card interchange fee calculated across the most recent four quarters will not exceed 50 basis points.

The Board is prepared to discuss the precise form of such a commitment bilaterally with the schemes.