Supplementary Submission to the Financial System Inquiry 1. The Payments System

1.1 Competition in the Retail Payments Market

The Bank concurs with the Interim Report's observation that regulation of credit card and debit card payment schemes is required for competition to lead to more efficient outcomes (FSI 2014, p xix). The following sections address areas where the Inquiry seeks further views in the area of retail payments.

1.1.1 Interchange regulation and competitive neutrality

The Bank strongly endorses the Interim Report's finding that interchange fee caps have improved the functioning of four-party payment schemes and the payments system (FSI 2014, p xix). The available evidence suggests that the effect of removing caps in Australia would be a significant increase in interchange fees and the cost of payments. The Bank notes that the Australian payment cards market has flourished in the period since its reforms were implemented and that a number of other jurisdictions have introduced similar regulation.

Accordingly, the Bank does not support the option of removing the caps on interchange fees.[1] Interchange fees may be appropriate in some circumstances, particularly in the establishment of new payment systems. However, the major card schemes are mature systems. In practice, with interchange fees being used to incentivise issuers to issue cards from a particular scheme and cardholders to use that card, the tendency has been for competition between mature card schemes to drive up interchange fees and costs to merchants, with adverse effects on the efficiency of the payments system.[2] This phenomenon has been most clearly observed in the United States credit card market, which has not been subject to any regulation (United States Government Accountability Office 2009). It has also occurred to an extent in the Australian credit card market over the past decade, with average interchange rates in the MasterCard and Visa systems tending to rise in between the three-year compliance resets under the current standard.[3] This has reflected the introduction of new, significantly higher interchange categories by the schemes.

Based on the evidence, removing interchange fee caps in Australia would significantly increase interchange fees. It would most likely be associated with an increase in the generosity of rewards programs on credit cards and a significant expansion in the use of rewards programs for debit cards. This would have distributional effects given that the Bank's recent survey of consumers' use of payments shows individuals in the highest income quartile are six times more likely to have premium cards than low income individuals.

The removal of interchange fee caps and expansion of rewards programs would result in higher costs to merchants. For example, if average merchant service fees on card payments in Australia rose to the levels seen in the absence of interchange regulation in the United States, annual costs to merchants could increase by around $4–4½ billion.[4] Such an increase in costs would in turn lead to higher prices for all customers (including those who do not pay with cards) and/or higher surcharges on card payments.

The Interim Report also discusses ‘companion’ credit cards in the context of competitive neutrality. In a typical ‘three-party’ scheme (such as American Express or Diners Club), the scheme is both issuer and acquirer, with no role for interchange fees. However, three-party schemes – most notably American Express – have in recent years entered into ‘companion’ card arrangements with financial institutions to issue their cards. These arrangements have interchange-like fees that are paid from the scheme to the issuer, and – as with traditional four-party arrangements (such as MasterCard and Visa) – may involve other incentive or marketing payments to issuers.

While American Express has not been designated and directly regulated, it has voluntarily agreed to remove its no-surcharge and no-steering rules, which had prevented merchants from surcharging on American Express transactions and from encouraging consumers to use another means of payment. Merchant service fees have fallen by more in the American Express system (0.71 percentage points) than in the designated MasterCard and Visa systems (0.61 percentage points) in the period to June 2014 since the standards on credit card interchange fees were introduced in 2003.

The Bank has indicated in its initial submission to the Inquiry that it will be reviewing concerns that have been raised surrounding the issuance of American Express companion cards by financial institutions (RBA 2014, pp 214–215). The current legal framework provides scope for the Payments System Board (PSB) to address any issues arising from that review (and consequential consultation if required) without the need for changes to existing legislation.

In considering those issues, it is likely that the PSB would also examine the broader functioning of the current interchange cap system. Any changes to the regulatory framework would, of course, be subject to extensive consultation and pay due regard to the complexity of the issues. However, some relevant considerations might include the following.

  • It is likely that any consultation would consider whether regulation of interchange fees should also include payments of similar economic substance. There are a range of payments (such as marketing fees, sign-on fees, incentive fees and rebates) from schemes to issuers that are used in both three- and four-party schemes. These other payments can potentially be used to circumvent interchange caps: for example, a scheme can increase fees charged to acquirers and use these funds to pay rebates to issuers, mimicking an interchange payment. Regulation of other incentive payments in debit card schemes has been implemented in the United States (Federal Reserve System 2011).[5]
  • Any consultation on interchange fees might also consider the weighted-average nature of the cap. Over the past decade, the international four-party card schemes have tended to introduce higher interchange rate categories such as ‘super premium’ and ‘elite’ cards and have increased the complexity of their interchange fee schedules.[6] The highest credit card interchange fee category is currently 2 per cent, nearly double the highest rate applying in November 2003. In comparison, the lowest interchange fee, which applies to transactions at ‘strategic’ merchants, is set at 0.20 per cent. As the PSB noted in its 2013 Annual Report, the cost of the higher interchange fee cards tends to fall on those merchants, typically smaller and medium-sized merchants, which do not benefit from preferential interchange status (RBA 2013a). One possibility would be for consultation on changes to interchange caps that would reduce the gaps between the high and low interchange categories. Alternatively, if some merchants were to continue to face large differences in interchange fees and merchant service fees on different cards from the same scheme, consideration could be given to the merits of measures to provide merchants with real-time information on the interchange category and/or merchant service fee applying to each transaction. There might also be a case for reviewing card scheme rules that require merchants to accept all credit cards or all debit cards from a scheme.
  • It is also likely that any review of interchange fee caps would include a consultation on the costs and benefits of a change to the level of the existing caps. In its 2007/08 review of the reforms to card payment systems, the PSB considered reducing the weighted-average interchange fee caps from 50 basis points to 30 basis points per transaction for credit cards and from 12 cents to 5 cents for debit cards but did not do so (RBA 2008). The European Commission has recently proposed to set a hard cap (i.e. a cap applying to all transactions) on credit card interchange fees of 30 basis points applying for consumer-level credit cards and the lesser of 7 euro cents or 20 basis points for debit cards.

The Interim Report also seeks views on the desirability of capping merchant service fees. The Bank is not convinced of the merits of this option. While interchange fees set by card schemes are an important component, merchant service fees for card payments also reflect the resource costs of the financial institution providing payment services to the merchant. The latter may differ widely based on factors such as the value of the merchant's turnover and the nature of the terminal and connection provided.

1.1.2 Surcharging

It is important that merchants can make decisions regarding acceptance and surcharging based on the costs and benefits of payment methods, given that different payment methods can have very different costs to merchants. For example, high interchange/high rewards cards can be very expensive for merchants that do not benefit from favourable strategic rates.

As outlined in the Bank's initial submission, surcharging reforms have improved price signals to cardholders and reduced the cost of payments to merchants. The Bank's assessment is that this has applied downward pressure on prices in a range of industries, to the benefit of all consumers. Accordingly, the Bank does not support the option of allowing established payment schemes to reintroduce ‘no-surcharge’ rules. The removal of the right to surcharge would most likely increase the cost of payments for merchants and thus the prices paid by consumers for goods and services. A number of other jurisdictions have followed the PSB's reforms and have also banned restrictive no-surcharging rules.

If a merchant wishes to surcharge for a particular payment method, the following principles are important.

  • There must be at least one non-surcharged payment method available to most consumers. This/these will typically be the low-cost means of payment for that merchant, and the cost of accepting this payment method should be built into the overall price of the good or service.
  • Any surcharge should be properly disclosed.

It seems reasonable to expect that market forces will usually prevent excessive surcharging. Most merchants are aware that surcharging affects the customer experience and so are likely to think seriously before putting excessive surcharges in place. However, as the Bank has noted in its submission, there are a few industries (such as the taxi and air travel industries) where card surcharges for at least some transactions appear to be excessive relative to costs.

The enforcement of rules against excessive surcharging presents challenges, not least because the cost of payments can vary widely across merchants depending on factors such as their size and industry. Most recent discussion of this issue has been in terms of card payments and the presumption has been that card schemes, which were in nearly all cases able to enforce their no-surcharge rules prior to 2003, will typically also be able to limit surcharges to the reasonable cost of card acceptance. However, any framework for enforcement should also be relevant to other means of payment where there is no scheme, for example to ensure that merchants do not surcharge excessively for cash, cheques or bank payments.

Enforcement activities are most appropriately focused on aspects of merchant behaviour that may limit the ability of market forces to prevent excessive surcharging. In particular, this includes ensuring that surcharges are prominently disclosed and that the non-surcharged payment method(s) is/are a genuine alternative for most customers. Indeed, the Australian Competition and Consumer Commission (ACCC), which has broad responsibility for consumer protection issues and appropriate expertise and enforcement powers, has recently initiated actions in these areas with respect to ‘drip pricing’ while the Australian Securities and Investments Commission (ASIC) has recently taken action on the disclosure of surcharges. The Bank supports the actions of the ACCC and ASIC and expects that a targeted approach could deal with most problems of excessive surcharging. The Bank also supports the actions of some state taxi regulators to deal with the issue of excessive surcharging in the taxi industry.

1.1.3 Payments processing

The Interim Report seeks views on whether acquirers should be required to give merchants more choice in the processing of their transactions.

This is particularly relevant in the case of dual-network debit cards – that is, cards with point-of-sale debit functionality from two payment networks. Some of the issues involved here were illustrated in a decision by Woolworths, a retailer with its own payments processing capacity. Between April 2010 and September 2012, Woolworths chose to route all debit transactions on dual-network cards through the domestic eftpos network rather than the networks of MasterCard and Visa, citing the higher cost of the latter networks (Woolworths Limited 2010). A number of other retailers have asked their financial institutions to route transactions via a preferred network but have been unable to obtain this capacity. The Australian Retailers Association has argued for merchant routing choice in its submission to the Inquiry.

The PSB has recently discussed the issue of merchant routing choice in the context of contactless cards. Following discussions between the Bank and the three debit schemes in 2012 and 2013, the schemes agreed they would not prevent merchants from exercising their own transaction routing priorities if cards are issued with two contactless debit applications on one card. Given that such cards have not yet been issued in Australia, it remains to be seen both whether merchants will ask their acquirers to provide routing choice and whether acquirers will offer this capacity.

One option that would be open to the PSB would be to consult on the costs and benefits of a standard that required acquirers to offer routing choice to merchants that requested it. The Bank considers its current regulatory powers are sufficient to implement this option, as a technical standard, if it was considered desirable. This was the course adopted in the United States in response to the Durbin Amendment to the Dodd-Frank Act. In the rules implemented by the Federal Reserve Board to meet the requirements of the legislation, where more than one network is available on a debit card, acquirers must route transactions through the network which the merchant has nominated as their preferred option among those networks available on the card.

The Interim Report also asked for views on whether information regarding interchange or merchant service fees should be available in real time as the transaction is occurring.

The Bank is aware of retailers that would like such information but that have been unable to obtain it. In general, greater transparency in the cost of payments to merchants is likely to place downward pressure on those costs. The availability of such information would enhance the ability of merchants to differentially surcharge based on the cost of the particular card to them or to refuse a card if the cost is deemed too high. The PSB could consult on the costs and benefits of a standard requiring such transparency. These costs and benefits could, however, change materially if the current large differences in interchange rates on different types of cards from the same network were to decline significantly.

1.2 Payment System Regulatory Architecture

1.2.1 Payment system regulatory perimeter

The Interim Report raises a number of questions surrounding the regulatory perimeter for retail payments. These can be separated into three distinct areas: payment systems; stored-value systems; and participants in payment systems. In each case, the current framework can be thought of as applying a graduated approach to regulation. In the case of payment systems, the Bank considers that the current framework remains appropriate. In the case of stored-value systems and participants in payment systems, arrangements put in place following the Wallis Inquiry, and subsequently in conjunction with the Australian Prudential Regulatory Authority (APRA), sought to provide a graduated approach to regulation. The Bank's view is that further enhancements could be made in these latter two areas.

Payment systems

The Bank considers that the existing legislative structure and approach to retail payment system regulation remains appropriate. The current approach is already graduated and the Bank has the power to designate and regulate payment systems when it is in the public interest to do so.

Payments regulation in Australia reflects a philosophy which assumes that the industry can adequately self-regulate in the majority of cases. The Bank intervenes only where a public policy issue arises that the industry is unable to address. This is consistent with the intent of the Payment Systems (Regulation) Act 1998 (the PSRA) as described by the explanatory memorandum:

The philosophy of the Bill … is co-regulatory. Industry will continue to operate by self-regulation in so far as such regulation promotes an efficient, competitive and stable payments system. Where the RBA considers it in the public interest to intervene, the Bill empowers it to designate a payment system and develop access regimes and standards in close consultation with industry and other interested parties. (Parliment of the Commonwealth of Australia 1998, p 12)

The PSB has acted in a manner consistent with this. It directly regulates only five payment systems (ATMs, eftpos, MasterCard and Visa credit, and Visa Debit) and only in limited areas – that is, the level of interchange fees, restrictions on merchants, transparency and access to systems. This means that the Australian system, by design, leaves many payment systems, and many aspects of regulated payment systems, unregulated. This stands in contrast to the more interventionist approach of some other jurisdictions.

The Bank's view is that the current approach has served Australia well. It has supported competition and innovation by allowing new players, often with new business models, to establish without undue regulatory burden. This seems appropriate because small players are less likely to pose significant risk or to compromise the efficiency of the payments system overall. At the same time, the approach is flexible enough to allow the PSB to designate a payment system when relevant public interest concerns arise and to direct regulation to the specific issue of concern, even where that concern might not have been anticipated by legislators following the Wallis Inquiry.

However, the above approach means that similar payment systems may sometimes be regulated differently. An alternative approach might be to seek to apply similar regulation across all payment systems. As an example, MasterCard and Visa have been required by regulation to remove no-surcharge rules and American Express and Diners Club have done so voluntarily, but some other (typically much smaller) systems retain similar rules in some circumstances. The PSB could adopt a blanket approach and prohibit no-surcharge rules and other merchant restrictions across all payment systems, although under the current legislative framework it would need to have already designated every system that had such rules.

Overall, the Bank does not see a pressing need for change to the current legislation and regulatory framework. The Bank already has the ability to broaden the coverage of its regulation if considered necessary. While this approach is likely to involve separate designations and standards for individual schemes, consistency and competitive neutrality can still be achieved. The current approach allows the PSB discretion to impose regulation at the point where an issue is likely to have a material effect on stability, competition or efficiency. This means that the benefits from broader regulation are likely to be modest.[7]

One qualification to the above assessment of the Bank's capacity to regulate is that, given ongoing innovation, it is not possible to know with confidence that all new payment systems will be capable of being regulated under the PSRA. For instance, the capacity to regulate payment systems embodied in digital currencies has not been tested.

Stored-value systems (or purchased payment facilities)

As noted in the Interim Report, the Bank supports the creation of a new framework, outside the supervisory framework of authorised deposit-taking institutions (ADIs), for the protection of the stored value in purchased payment facilities (PPFs). While it would likely require legislative change, the Bank sees this as the principal area where payments regulation could be simplified. The Bank also believes that the definition of PPFs should be clarified and that the transitional relief provided to some holders of stored value when the PSRA came into force should be revisited.

A PPF may perform the functions of a payment system in its own right, for instance where users each hold a member account with the PPF provider and can make payments to one another by transferring funds between those accounts. This is the model used for some online payment systems (e.g. PayPal) and the ‘mobile money’ systems used in some developing countries. A PPF might also hold stored value that is used through an unrelated payment system, for instance a prepaid card, issued by an entity that is not a financial institution, which allows holders to access funds and make payments through the eftpos network.

Like any other financial product, PPFs are subject to ASIC's conduct and disclosure regulation. In addition, if the PPF is widely available and redeemable in Australian currency, its provider is deemed to be carrying on banking business and must be authorised as an ADI by APRA. Under the PSRA, any other PPF must be authorised or exempted by the Bank. The Bank has not authorised any PPFs (PayPal is authorised by APRA), but has effectively exempted limited use and low-value facilities.

The Bank believes that the primary reason for regulation of PPFs should be to protect consumers' stored value. However, this regulation does not need to be the same as for ADIs. The promise provided to consumers purchasing a PPF is similar to that in a deposit (i.e. the full face value is expected to be redeemable), but PPFs do not extend credit and have simpler balance sheets than financial institutions. Reflecting this, the regulation of entities equivalent to PPFs in other jurisdictions is typically light-touch, focusing on: ring-fencing customer funds; restricting the assets that can be held by the provider (including applying liquidity requirements); and in some cases minimum capital requirements and restrictions on the payment of interest. Authorising PPFs as ADIs, but subjecting them to lesser supervision than other ADIs, might be seen as undermining the integrity of the ADI framework.

While the Bank shares regulatory responsibility for PPFs under the PSRA, it is not well placed to authorise and supervise individual PPFs; such activities are markedly different to its other regulatory functions in relation to retail payments, which focus largely on high-level policy rather than supervision and enforcement.

A separate light-touch supervisory framework for PPFs would represent a graduated approach as PPFs would not need to be regulated within the same framework as ADIs. A separate decision would need to be made about whether there should be further graduation within any new framework, for instance replicating current arrangements whereby smaller facilities are not supervised. However, to the extent that a value threshold was applied for this purpose, a registration system that allowed monitoring of the stored value held by unsupervised facilities might be beneficial.

Where a PPF performs the functions of a payment system in its own right, it would be appropriate for that payment function to continue to be overseen by the Reserve Bank in the same way as other payment systems, with the option for designation and regulation when it is in the public interest.

Separately, the Bank considers that the definition of PPFs in the PSRA is unclear, making it difficult to enforce. In addition, non-ADI holders of stored value at the time that the current regulatory framework came into effect were deemed to be authorised.[8] The status of these entities should be revisited.

Participants in payment systems

The Bank does not believe that it is necessary for regulation to require all payment system participants to be supervised. However, the Bank sees merit in the consideration of a lighter-touch supervisory framework, separate from the ADI framework, which new participants could seek to opt-in to, in order to demonstrate their standing to operators of payment systems and other payment system participants. It is likely that some retail payment systems would adopt this as a membership threshold.

Payment system participants are the members of payment systems who use those systems to facilitate the transfer of funds – often between financial institution accounts. For instance, a bank can facilitate the transfer of funds from a customer's account to the account of a customer of another bank through the cheque, Direct Entry, eftpos, MasterCard or Visa systems, provided both banks are participants in that system or have an agency arrangement with a participant. Payment system participants are usually, but not always, financial institutions. Opening participation to other entities increases competition, but this must be balanced against the potential for additional risk to be introduced to the payments system. Financial institutions have raised ‘level playing field’ concerns about competing with entities that are less regulated or unregulated.

The Bank believes that participants in payment systems do not all need to be regulated to the same standard. The regulatory obligations appropriate to financial institutions that accept deposits from the public and extend credit would be excessive for institutions with more limited business, because they do not make similar financial promises or pose the same risk to the financial system. However, it is legitimate for a payment system and its participants to seek some assurance about the financial standing of other participants and their capacity to meet their obligations. In some cases ADI status is adopted as the clearest objective test of the financial standing of potential participants, even though payment system operators would be prepared to admit a wider range of participants if another objective, but less onerous, test existed.

The specialist credit card institution (SCCI) framework introduced in 2003 and 2004 was an attempt to achieve a more competition-friendly approach to participation in the MasterCard and Visa credit card systems. This framework allowed entities that were not traditional financial institutions to join the MasterCard and Visa systems, but in the process forced them into APRA's ADI supervisory framework. The PSB has recently decided that, given developments in the credit card systems since 2004, this framework can be dismantled in favour of placing more discretion in the hands of MasterCard and Visa, potentially opening participation in these systems further. One reason for adopting this approach was that Australia's regulatory framework does not currently have a separate lighter-touch supervisory arrangement appropriate to entities whose focus is payments rather than deposit-taking.

Should a separate supervisory framework be established for PPF providers, it could also be extended to provide a lighter-touch supervisory framework for non-ADI payment system participants. The Bank does not consider that it would be necessary for all non-ADI payment system participants to be required by regulation to be supervised under such a regime, but a lighter-touch framework might readily be adopted by retail systems as the threshold for participation and provide a means for potential participants to demonstrate their standing to system operators and other participants. As with the Bank's suggestions for PPFs, such a regime should be clearly distinct from the ADI regime.

1.2.2 Independence and accountability

The Bank supports the Inquiry's consideration of the independence and accountability of regulators. The PSB benefits from a high degree of independence, and accountability mechanisms are in place to ensure that its powers and functions are carried out effectively and to the benefit of the people of Australia.

The operating model for the PSB provides a high level of accountability. The role and membership of the PSB is set out in statute with obligations for members to ensure that the Reserve Bank's payments system policy is directed to the greatest advantage of the people of Australia, and that the powers of the Bank are exercised in the public interest. The accountability mechanisms for the PSB include:

  • A majority of members are independent, consistent with Recommendation 108 of the Wallis Inquiry (and with current ASX Corporate Governance Principles). Currently, only 2 of the 8 members of the PSB are Reserve Bank officials.[9]
  • The Bank publishes an Annual Report providing a thorough account of the activities of the PSB and the Bank's Payments Policy Department over the preceding year. This report is tabled before Parliament and published on the Bank's website.
  • The Governor and other senior officials of the Bank appear twice a year before the House of Representatives Standing Committee on Economics, where any aspect of the PSB's Annual Report or the Bank's operations can be raised.
  • Consistent with its statutory obligations, the Bank consults widely and at length before undertaking any regulatory action. Where required, the Bank also publishes a Regulation Impact Statement as part of communicating any regulatory decision made by the PSB. It also remains very open to discussions with any and all parties that may be affected by the Bank's regulatory actions.
  • The Bank's approach to its powers and the consultation it has undertaken are subject to scrutiny in the courts.
  • The PSB has adopted a conflicts of interest policy addressing the possibility of any perception that the Bank's policy function and its operational role as provider of banking services may be in conflict.

The accountability mechanisms for the Reserve Bank as a whole are available at

1.3 Technology

The Bank considers that its existing powers are adequate to deal with issues of innovation and technology in the payments system.

As noted in the Interim Report, the Bank has played a catalytic role in the progress that has been made to date to establish infrastructure that will support a modern real-time retail payment system (the New Payments Platform or NPP). However, in general, the Bank considers that the public sector should be cautious in playing such a role. In the case of real-time payments, the Bank intervened only after it had become clear that there were gaps in payment services that were not being addressed by the market and that coordination problems were playing a significant part in this. Furthermore, in seeking to have those gaps addressed, the Bank has not dictated solutions, setting out only the objectives and the proposed time frame and allowing the industry to determine the most efficient solutions. The Bank has worked cooperatively with the industry, and has not needed to use its standard-setting powers. The Bank considers this approach to have been effective, but notes that it would not be appropriate in all situations. In particular, any catalytic or regulatory intervention when technology is changing rapidly heightens the risk that inferior technology might be locked in or other unintended consequences occur.

Because the Bank only regulates where clear public interest considerations require intervention, it considers that the regulatory framework for the payments system fulfils the principle of technology neutrality; new technologies can evolve without regulatory hindrance. Similarly, the Bank's powers have been broad and flexible enough to handle an evolving market. For instance, the standards it set in the early 2000s for credit cards have remained relevant as payment methods have evolved to include online payments, near-field communication and mobile payments.


The Bank noted in the context of the 2007/08 Review on the reform of Australia's payments system that it might consider stepping away from interchange regulation if it believed the industry was able to self-regulate effectively and that interchange fees would not increase in absence of regulation (RBA 2008, pp 15–23). However, the Payments System Board decided in 2009 that conditions had not been met for the removal of interchange regulation (RBA 2009). [1]

Interchange fees have had the perverse effect of driving greater use of more expensive payment methods. Evidence on the resource costs of different payment methods is provided in RBA and ACCC (2000), Schwartz et al (2008, pp 88–138) and the Bank's ongoing payments cost study, which will be released in late 2014. [2]

The Standard requires that every three years or at the time of any reset, the weighted average of each scheme's interchange fees – based on applying the new interchange rates to the transactions of the most recent financial year for which data are available – is less than the benchmark. [3]

The calculation takes the number and value of card transactions acquired in Australia and applies US merchant service fees. The US merchant service fee data are from The Nilson Report (2014) for the latest available year (2013) except in the case of debit cards, where pre-Durbin Amendment merchant service fees (2010) are assumed (The Nilson Report 2011). The implied average of merchant service fees for the US is 1.70 per cent, compared with the actual average for Australia of 0.72 per cent. [4]

The Federal Reserve System's Final Rule ‘Regulation II, Debit Card Interchange Fees and Routing’ (12 CFR Part 235) implementing the Durbin Amendment explicitly deals with the issue of non-interchange fee payments – see in particular section 235.6(b). [5]

The tendency towards a larger number of interchange categories is not a purely Australian phenomenon and not specifically a product of our regulatory system. For example, in the United States, where there is no regulation of credit card interchange, the average number of credit card interchange fee categories for MasterCard and Visa increased from 4 in 1991 to 151 in 2009 (United States Government Accountability Office 2009, p 15). Currently, US interchange rates can be as high as 3.25 per cent (plus 10 cents) for some transactions. [6]

As an example, no-surcharge rules are most detrimental where merchants feel commercial pressure to accept a particular payment method. A small payment system that merchants felt under no obligation to accept would have difficulty enforcing a no-surcharge rule if it wanted its product to be accepted. Accordingly, a blanket ban on no-surcharge rules is likely to be little different in practice to requiring the removal of such rules only for systems that have a degree of market power. [7]

As provided in Schedule 19, Part 5 of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. [8]

More information about the membership of the PSB is available at [9]