Reform of Australia's Payments System 2. The Payments System Board's Mandate and Objectives

The Payments System Board's responsibilities stem from the Financial System Inquiry, whose findings and recommendations were released in 1997.[1] The Inquiry found that, while earlier deregulation had improved competition and efficiency in Australia's payments system, further gains were possible. To that end, it recommended the establishment of the Payments System Board at the Reserve Bank with the responsibility and powers to promote greater competition, efficiency and stability in the payments system. The Government accepted those recommendations and established the Payments System Board in 1998. The Board's responsibilities are set out in the Reserve Bank Act 1959. The Act requires the Board to determine the Bank's payments system policy so as to best contribute to: controlling risk in the financial system; promoting the efficiency of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of the financial system.

At the time the Board was established, the Government also provided the Bank with specific powers to regulate payment systems in order to implement the Board's policies. The most relevant powers in the context of the card payment reforms are those set out in the Payment Systems (Regulation) Act 1998. Under this Act, the Bank has the power to designate payment systems and to set standards and access regimes in designated systems. The Act also sets out the matters that the Bank must take into account when using these powers, including the desirability of payment systems: being financially safe for use by participants, efficient and competitive; and not materially causing or contributing to increased risk to the financial system.

The Bank's reforms to the card payment systems have aimed to improve the efficiency of the overall payments system and to promote competition. In particular, they have sought to: increase the transparency of the system; remove or modify restrictions that hinder competitive forces; liberalise access arrangements; and promote price signals to consumers that are conducive to the efficient evolution of the payments system. These reforms are discussed in the following section.


Financial System Inquiry (1997), Final Report, March. [1]