RESERVE BANK OF AUSTRALIA
Payment Systems (Regulation) Act 1998
EXPLANATORY STATEMENT: ACCESS REGIME FOR the DESIGNATED EFTPOS SYSTEM
Background
The Reserve Bank has been examining interchange fees and access arrangements for Australia's debit card systems for a number of years. The early findings from this work were published by the Bank and the ACCC in Debit and credit card schemes in Australia: A study of interchange fees and access (the Joint Study) in October 2000.
In April 2006, the Reserve Bank released a package of reforms to Australia's debit card systems. The package of reforms included an Access Regime for the EFTPOS System. The Access Regime is the result of co-operative work between the Bank and the Australian Payments Clearing Association (APCA) over a number of years. Together with the EFTPOS Access Code developed by APCA, it will significantly improve access arrangements to Australia’s EFTPOS system.
Purpose and Operation
The objective of the Reserve Bank's Access Regime for the EFTPOS system is to improve arrangements for new participants to gain access to Australia’s EFTPOS system. The Regime will promote competition in the provision of EFTPOS payment services and increase efficiency in both the EFTPOS system and Australia’s payments system as a whole.
The Access Regime sets a cap on the price that an existing participant can charge to establish a new connection and sets out provisions that will help ensure that negotiations over interchange fees are not used to frustrate entry.
Other important aspects of entry are covered in APCA's Access Code. These include providing new and existing participants with the right to establish direct connections with participants in the EFTPOS system and setting a time frame under which connections must be established. The Access Code has been adopted by the eight institutions that are the members of EFTPOS Access Australia and has been published on APCA’s website.
Consultation
The Access Regime is the result of co-operative work between the Bank and APCA (the relevant industry body) over a number of years. During this process, the Bank consulted with current participants in the system and potential new entrants.
The rationale for the reform package is discussed in the Bank's Media Release Reform of Debit Card Systems in Australia, 7 July 2006 and the accompanying Regulation Impact Statement. Both documents are publicly available.
The Regulation Impact Statement also sets out in detail the extensive consultation undertaken by the Bank. It summarises the various arguments made during the consultation process and the Bank's reasoning in coming to its final decisions.
Documents
- RBA Media Release: Reform of Debit Card Systems in Australia, 7 July 2006, is available on the Reserve Bank’s website at http://www.rba.gov.au/MediaReleases/2006/mr_06_02.html
- The Regulation Impact Statement detailing these changes is available on the Reserve Bank’s website at http://www.rba.gov.au/PaymentsSystem/Reforms/DebitCardSystemsAus/ImpactStatementApr2006/impact_statement_0406.pdf;
- All documents can be obtained by contacting the Manager, Media Office, Information Department, Reserve Bank of Australia, 65 Martin Place, Sydney NSW 2000 SYDNEY. (telephone) 02 9551 9720 or (fax) 02 9221 5528.
- The Access Code developed by APCA is available on the APCA website at www.eftposaccess.com.au.
Reserve Bank of Australia
SYDNEY
Overview
The Reserve Bank of Australia Payment Systems (Regulation) Act 1998 was enacted to address the need for effective regulation of payment systems in Australia, ensuring efficiency, stability, and innovation in the financial services sector. The Act empowers the Reserve Bank to implement measures that safeguard the integrity and functionality of the nation's payment infrastructure. The Access Regime for the EFTPOS System, introduced as part of a comprehensive reform package in April 2006, was designed to address the issues surrounding interchange fees and access arrangements within Australia's debit card systems. This regime, developed in collaboration with the Australian Payments Clearing Association, aims to enhance competition, improve access for new participants, and streamline the EFTPOS payment services. The policy objective is to foster a more competitive and efficient payments system that benefits both consumers and businesses.
Scope and Application
The Reserve Bank of Australia Payment Systems (Regulation) Act 1998, as amended, applies to all participants in Australia’s EFTPOS system, including banks, financial institutions, and payment service providers, ensuring that they comply with the set regulations for the designated EFTPOS system. This Act extends across the entire Commonwealth of Australia, governing the operations and access arrangements within the nation’s EFTPOS framework. The Act sets out provisions to cap the price charged by existing participants for establishing new connections, thereby promoting fair competition and efficient payment services. It also addresses the negotiation of interchange fees to prevent the hindrance of new market entrants. The scope of the Act is supported by the EFTPOS Access Code developed by the Australian Payments Clearing Association, which further outlines the rights and obligations of both new and existing participants. While the Act broadly applies to all entities involved in the EFTPOS system, specific exclusions or exemptions are not explicitly detailed in the explanatory statement but may be addressed in the Access Code and subordinate instruments. The Act’s application is further extended through these subordinate instruments, ensuring comprehensive coverage of the EFTPOS system.
Key Provisions
The Reserve Bank of Australia Payment Systems (Regulation) Act 1998, specifically under the Access Regime for the Designated EFTPOS System (sections 9AA and 9AB), is designed to regulate the pricing and access arrangements for new participants in Australia's EFTPOS system. The primary objective of this regime is to establish a cap on the price that existing participants can charge new entrants to connect to the EFTPOS system, ensuring that these fees do not hinder competition or market entry. This cap is intended to foster a more competitive environment in the EFTPOS payment services sector and enhance the overall efficiency of Australia's payments system. Furthermore, the regime sets out provisions to ensure that negotiations over interchange fees do not become a barrier to new entrants. These provisions are further detailed in the EFTPOS Access Code developed by the Australian Payments Clearing Association (APCA), which includes the right for new and existing participants to establish direct connections with EFTPOS system participants and mandates a timeframe within which these connections must be established.
The Access Regime, along with the EFTPOS Access Code, imposes several obligations on the parties involved. These include the requirement for existing EFTPOS participants to adhere to the set cap on connection fees, ensuring that they do not charge excessive amounts to new entrants. Additionally, participants must facilitate direct connections with other system participants within the specified timeframes outlined in the Access Code. The regime also mandates that negotiations over interchange fees are conducted in a manner that does not impede market entry or competition. The obligations are designed to promote fair and efficient access to the EFTPOS system, thereby encouraging competition and innovation in the EFTPOS payment services sector.
Failure to comply with the provisions of the Access Regime and the EFTPOS Access Code may result in various consequences. Although the specific penalties are not detailed in the explanatory statement, it is reasonable to infer that breaches of these provisions could lead to regulatory action by the Reserve Bank of Australia. Such actions may include the imposition of fines, corrective measures, or other administrative actions aimed at ensuring compliance with the regime's requirements. Additionally, persistent non-compliance could potentially lead to more severe penalties, including the possibility of legal action under other relevant legislation. The exact nature and extent of the penalties would depend on the specific circumstances of the breach and the discretion of the regulatory authorities.