Payments System Board Annual Report – 2007 List of tables

Table 1: Number of Meetings Attended by Each Member in 2006/07

Table 2: Australian Non-cash Retail Payments

Table 3: Credit and Debit Card Accounts

Table 4: Non-cash Retail Payments in Selected Countries

Table 5: Fraud on Locally-issued Cards, 2006

Table 6: Credit Card Interchange Fees

Table 7: Scheme Debit Card Interchange Fees

Table 8: Credit Card Rewards Programs

Table 9: Core Principles and Central Bank Responsibilities for Systemically Important Payment Systems

Table 10: Actions to Improve Observance of the Core Principles – Recommendations and Responses

Table 11: FX Obligations by Settlement Method

Table 12: FX Obligations by Currency and Settlement Method

Table 1: Number of Meetings Attended by Each Member in 2006/07(a)
Ian Macfarlane(b) 1 (1)
Glenn Stevens(c) 3 (3)
Philip Lowe 4 (4)
John Laker 4 (4)
Joe Gersh 4 (4)
Susan McCarthy 4 (4)
Robert McLean(d) 2 (2)
John Poynton 3 (4)
(a) Figures in brackets show the number of meetings each member was eligible to attend.
(b) Mr Macfarlane's term as Governor ended on 17 September 2006.
(c) Mr Stevens was appointed Governor on 18 September 2006.
(d) Mr McLean was appointed to the Board on 29 November 2006.
Table 2: Australian Non-cash Retail Payments
Year to June 2007 Growth, year to June 2007
Per cent of total Per cent
Number Value Average value ($) Number Value
Cheques 8.6 14.1 4,039   −7.7 4.0
Direct debits 10.6 34.8 8,062   6.2 14.0
Direct credits 23.5 47.8 4,963   9.8 14.7
Debit cards 27.7 0.8 68   9.4 9.6
Credit cards 25.7 1.5 138   5.4 9.4
BPAY 3.9 1.1 671   15.6 19.4
Total 100.0 100.0 2,446   6.6 12.7

Sources: BPAY; RBA
Table 3: Credit and Debit Card Accounts
Growth, per cent, year to:
June 2007 June 2007 June 2006 June 2005
Number of accounts
Credit (million)* 13.5 4.4 8.1 6.5
Debit (million) 27.0 4.3 2.9 1.6
Advances outstanding*
Total ($ billion) 40.8 11.4 16.7 13.1
Accruing interest ($ billion) 29.1 10.1 18.6 13.2
Average total outstanding per account ($) 3,014 4.4 8.1 6.5

* Includes credit and charge card accounts

Source: RBA
Table 4: Non-cash Retail Payments in Selected Countries
Number per capita, 2005
Cheques Direct
debits		 Direct
credits		 Debit
cards		 Credit
cards		 Total
United States 112 25 19 75 70 299
Canada 42 19 27 95 60 243
United Kingdom 32 45 50 70 35 232
France 63 40 38 84* na 225
Netherlands 0 63 75 82 5 224
Australia 24 24 59** 59 58 224
Sweden na 18 57 97 20 192
Germany 1 81 81 24 5 192
Switzerland 0 7 82 37 14 140
Singapore 20 12 6 32 na 69

* Split between debit and credit cards not available
** Includes BPAY transactions

Sources: Bank for International Settlements (BIS); RBA
Table 5: Fraud on Locally-issued Cards, 2006
Cents per $1,000 transacted
Category Australia United Kingdom
Lost/stolen 4.6 12.6
never received 1.4 2.8
Fraudulent application 1.2 2.2
Counterfeit/skimming 7.8 18.4
Card not present 6.6 39.2
Other 2.2 3.7
Total 23.9 79.0

Sources: APCA; APACS
Table 6: Credit Card Interchange Fees
Exclusive of GST
MasterCard Visa
1 Nov
2006		 26 Jun
2007		 1 Nov
2006		 30 Jun
2007
Consumer standard 0.30% 0.43%   0.55% 0.55%
Consumer electronic 0.46% 0.43%   0.40% 0.40%
Consumer chip – 0.63%   0.50% 0.50%
Commercial 1.12% 1.15%   1.15% 1.15%
Commercial chip – 1.35%   – –
Premium 0.90% 0.95%   0.90% 0.90%
Premium chip – 1.15%   1.00% 1.00%
VMAP* – –   – 0.30%
Tiered merchants – 0.34%   – –
Petroleum – 0.34%   – –
Government and utility          
– electronic – 0.30%   30.0¢ 30.0¢
– standard – 0.30%   74.0¢ 74.0¢
Micropayment – –   2.5¢ 2.5¢
Charity – 0%   0% 0%
Recurring payments – 0.30%   0.40% 0.40%
Quick/express payments – 0.30%   0.40% 0.40%
Benchmark 0.50% 0.50%   0.50% 0.50%

* Visa Merchant Alliance Program

Sources: MasterCard website; RBA; Visa website
Table 7: Scheme Debit Card Interchange Fees
Exclusive of GST
MasterCard Visa
1 Nov 2006 26 Jun 2007 1 Nov 2006
Consumer standard – 36.4¢ 0.31%
Consumer electronic – 9.1¢ 8.0¢
Consumer chip – 13.6¢ –
Commercial – 36.4¢ –
Commercial chip – 40.9¢ –
Tiered merchants – 3.6¢ –
Petroleum – 9.1¢ –
Government and utility      
– electronic – 29.1¢ 8.0¢
– standard – 29.1¢ 37.0¢
Micropayment – 0.50% 2.5¢
Charity – 0% 0%
Electronic incentive – – 4.0¢
Recurring payments – 9.1¢ 8.0¢
Quick/express payments – 0.50% 8.0¢
Benchmark 12.0¢ 12.0¢ 12.0¢

Sources: MasterCard website; RBA; Visa website
Table 8: Credit Card Rewards Programs
Four largest banks, June 2007
Average spending
required for
$100 voucher 		Benefit to
cardholder as a proportion of
spending (%)
2003 12,400 0.81
2004 14,400 0.69
2005 15,100 0.66
2006 16,000 0.63
2007 16,300 0.61

Sources: Banks' websites, Cannex
Table 9: Core Principles and Central Bank Responsibilities
for Systemically Important Payment Systems
Core Principles for systemically important payment systems
I. The system should have a well-founded legal basis under all relevant jurisdictions.
II. The system's rules and procedures should enable participants to have a clear understanding of the system's impact on each of the financial risks they incur through participation in it.
III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.
IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day.
V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation.
VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.
VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.
VIII. The system should provide a means of making payment, which is practical for its users and efficient for the economy.
IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.
X. The system's governance arrangements should be effective, accountable and transparent.
Responsibilities of the central bank in applying the Core Principles
A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.
B. The central bank should ensure that the systems it operates comply with the Core Principles.
C. The central bank should oversee observance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.
D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities.
Table 10: Actions to Improve Observance of the Core Principles – Recommendations and Responses
Legal foundation
Recommendation: Require entities located outside the Australian jurisdiction that apply for participation in RITS either as a branch or on a remote basis to provide a legal opinion that analyses possible conflict of laws and potential legal risk for RITS and its participants.
Response: At this stage the RBA is not convinced that the potential legal risks arising from the participation in RITS of entities not located in Australia warrant the additional cost to new participants of gaining further legal certainty.
Security and operational reliability, and contingency arrangements
Recommendation: Require security enhancement of the proprietary communication network to meet international standards with regard to confidentiality, integrity and authenticity of the transmitted information and data. Consider an external review of the RBA's business continuity plan that would include the assessment of the hardware, software and internal procedures.
Response: Implementation of a new RITS user interface was completed in April 2007, bringing the confidentiality, integrity and authenticity of transmitted data up to best practice. This project was well advanced at the time of the FSAP assessment. The RBA is considering the commissioning of an external review of RITS architecture in 2007/08, including business continuity arrangements.
Efficiency and practicality of the system
Recommendation: Consider following up its studies of RITS costs and pricing structure by consulting RITS users. The RBA should consider a review of the pricing structure to ensure that it promotes efficient functioning of the system.
Response: The RBA's Business Services Group has undertaken considerable work on pricing of RITS transactions and various means of balancing requirements for cost recovery, system efficiency and the provision of appropriate incentives for participants. Liaison with industry will occur in due course.
Governance of the payment system
Recommendation: Consider establishing a consultative framework with the users in order to ensure RITS continues to meet users’ needs in terms of efficiency, practicality and service level. The RBA may wish to re-establish its advisory user groups, representing different categories of RITS participants, to discuss issues related to technical and business features of RITS.
Response: The RBA now holds RITS User Group Forums in Sydney and Melbourne twice each year. The first forums were held in February 2007.
Central bank responsibilities in applying the Core Principles
Recommendation: Consider whether current arrangements avoid potential conflicts of interest between the policy and oversight functions (that fall under the jurisdiction of the PSB) and the RBA's role as an operator of the RITS system. Strengthen the implementation of the PSB's oversight responsibility by developing formal methods and procedures including regular monitoring and reporting, on-site inspections of important payment systems and arranging regular meetings with payment system providers and other stakeholders.
Response: Internal RBA discussion offers considerable benefits and the Board is satisfied that procedures are in place to identify and address any conflicts of interest that might arise.
Table 11: FX Obligations by Settlement Method
$US billion equivalent
All
institutions		 % of total Australian
banks		 % of total
CLS (PvP) 2,091 55 76 60
Correspondent banking 1,224 32 44 35
Bilaterally netted 304 8 5 4
‘On us’ without settlement risk 112 3 1 1
‘On us’ with settlement risk 53 1 0 0
Other PvP 38 1 0 0
Total settlement obligations 3,821 100 126 100

Source: BIS
Table 12: FX Obligations by Currency and Settlement Method
Per cent of total
All USD EUR JPY GBP CHF AUD
CLS (PvP) 55 55 58 62 54 58 58
Correspondent banking 32 31 29 24 32 26 30
Bilaterally netted 8 8 7 8 9 8 8
All other 5 6 5 6 4 7 3
Total settlement obligations 100 100 100 100 100 100 100

Source: BIS