Dual-Network Cards and Mobile Wallet Technology 4. Some Emerging Issues

With the expected strong growth in mobile payments, it is not surprising that there is strong competition between issuers, schemes and mobile wallet providers in this sphere. However, stakeholders have drawn attention to some specific behaviours that may raise concerns for policy.

In particular, stakeholders report conduct that has sought to prevent or deter Australian issuers of dual-network cards from provisioning those cards to enable eftpos mobile payments. Stakeholders have raised concerns with the Bank about two types of actions:

  • Scheme rules or policies of a network that prevent or hinder Australian card issuers from provisioning a competitor network for mobile payments (either expressly or through policies or restrictions that achieve that outcome in practice). In particular, stakeholders have raised concerns that issuers with existing dual-network cards might be prevented from enabling both networks on those cards for mobile payments.
  • Contractual terms for tokenisation services that could penalise an Australian issuer for provisioning a competitor network for mobile payments. In particular, stakeholders have raised concerns that contractual terms may allow a scheme to increase the price of tokenisation services for issuers that choose to also enable a network other than that scheme.

Any such actions (and potentially other related conduct) would appear to raise issues relevant for the Payments System Board's mandate under the Reserve Bank Act 1959 and the Payment Systems (Regulation) Act 1998 to promote competition and efficiency. They might also raise concerns under competition law.

In considering these matters the Board is guided by its view that competition and efficiency in the payments system are likely to be enhanced where there are a wide range of payment options for consumers and merchants. Mobile wallets represent a technology that allows greater choice by end users. In particular, the physical constraints applied by the size of a traditional wallet or purse – which made the functionality offered by having multiple networks on a single plastic card desirable – no longer apply in the mobile world, where a single device has the potential to store as many cards as the consumer wishes to hold. The Board's longstanding position is that the issuance of physical dual-network cards promotes payments system efficiency and competition between payment methods. Dual-network cards are convenient for consumers and enhance the ability of merchants to encourage the use of lower-cost payment methods. Hence, it would be concerning if, as a new technology is adopted, protocols or rules were put in place that have the effect of reducing competition in the debit card market by making it more difficult for schemes to compete, or impeding the efficient migration of existing competitive arrangements from the physical card to the mobile wallet environments.

Some stakeholders have suggested that it could be in the public interest for the Board to determine a standard that would preclude rules, policies or conduct of any scheme that prevent or make it more difficult and/or costly for issuers to provision a competing network. Before the Board considers the case for such a standard, it wishes to obtain further information and to hear the views of the full range of stakeholders on this issue.

Accordingly, the Board invites stakeholders to make submissions to the Bank that address any or all of the questions below. In addition, it invites stakeholders to provide information on any other matters that are relevant to the issues discussed in this paper.

Questions for consultation:

  1. What are the views of end-users (cardholders and merchants) regarding dual-network cards, including their use in mobile payments? Are there particular benefits that arise for end-users from having multiple payment networks available on a mobile device? What risks and costs might arise?
  2. Are there any impediments or restrictions imposed (or planned or foreshadowed) by card schemes on the mobile wallet provisioning of competing networks on dual-network cards? If so, how significant are these and can they be justified on commercial or other grounds?
  3. What are the likely effects – on competition and efficiency in the payments system, as well as more broadly – of the action of any scheme to prevent or discourage the mobile wallet provisioning of a competing network on a dual-network card? Are there benefits for end-users that arise from rules or policies that constrain the provisioning of an additional network on a device?
  4. Do cardholders, issuers or others have views as to the feasibility of different possible ways of provisioning dual-network cards?
  5. Under the existing voluntary undertakings to the Bank in place since August 2013 (see page 4), schemes have committed to some voluntary principles regarding dual-network cards. Have these principles been an effective response to the competitive issues that arose earlier? Have there been any issues in practice with the operation of these principles? Would an extension of these principles be an appropriate response to the current issues?
  6. Are there any foreign precedents that are relevant for the consideration of these issues in Australia?
  7. Are the issues raised relevant only to dual-network debit cards or are they also relevant to so-called ‘combo cards’ with credit functionality from one scheme and debit functionality from another?
  8. Are there any prospective developments in payment card technology that may be relevant for the Bank as it considers these issues?
  9. If the Bank were to contemplate a standard addressing conduct in this area, are there particular compliance costs that would arise for industry?