RESERVE BANK OF AUSTRALIA

Payment Systems (Regulation) Act 1998

EXPLANATORY STATEMENT: ACCESS REGIME FOR THE VISA DEBIT SYSTEM

1.             Background

The Payment Systems (Regulation) Act 1998 (‘the Act’) gives the Reserve Bank the power to impose an access regime on the participants in a designated payment system. The decision to impose an access regime on the Visa Debit payment system follows the Bank’s earlier reforms to the three designated credit card schemes in Australia. As part of its reforms to the credit card system, the Bank imposed an access regime on the Bankcard, MasterCard and Visa schemes which, amongst other things, prohibited them from discriminating against a new class of authorised deposit-taking institution, known as Specialist Credit Card Institutions (SCCIs). In the case of Visa, the effect of the credit card access regime was to override Visa’s rules that ordinarily prevent institutions that do not accept demand deposits from joining the Visa credit card system.

2.             Purpose and Operation

The purpose of the access regime is to ensure that SCCIs are eligible to participate in the Visa Debit system as well as the Visa credit card system.

Visa advised the Reserve Bank that, in the absence of the access regime for the Visa Debit system, its international rules may prevent an SCCI from joining the Visa scheme. This was despite the access regime for the Visa credit card system, previously imposed by the Bank, prohibiting discrimination against SCCIs. Visa indicated that, since this latter regime strictly only applies to the credit card system, an SCCI intending to acquire both Visa credit and debit card transactions might not be able to join the Visa scheme.

The access regime for the Visa Debit system will ensure that SCCIs are able to join the Visa system to undertake both credit and debit card transactions. It will promote efficiency and competition in the provision of card payment services to merchants and cardholders by facilitating participation in the Visa Debit system and the Visa credit card system of institutions that specialise in card issuing, acquiring, or both, but that do not conduct other banking business.

3.             Consultation

Details of a proposed access regime were set out in a Consultation Document released by the Bank on 20 July 2005, and comments on this draft regime were invited from interested parties.

Three submissions were received by the Bank. One party indicated that it ‘fully supports the proposed access regime for Visa Debit’ which it views ‘essentially as a ‘technical’ correction to the access regime for Visa membership for card acquiring’. Visa also welcomed the proposed access regime, both in its formal submission and in earlier correspondence with the Bank. Visa did, however, raise one technical issue regarding the definition of ‘debit card’ in the draft access regime, which the Bank has clarified in the final version of the access regime.

Finally, one party suggested that the proposed access regime should be expanded further, so that any holder of an Australian Financial Services Licence ‘would be eligible to participate in the Scheme in Australia’. The Bank remained of the view that new entrants to the designated credit and debit card schemes should remain subject to APRA supervision (which is not required of holders of Australian Financial Services Licences) and did not accept this suggestion.

Subsequently, in accordance with section 12 of the Act, the Reserve Bank has announced the imposition of the access regime to be complied with by the participants in the designated Visa Debit system operated within Australia. This access regime is essentially identical to that released by the Bank for public consultation, with the exception that the definition of ‘debit card’ has been amended to make it accord with that in draft Standard No. 5 (entitled The ‘honour all cards’ rules in the Visa Debit and Visa credit card systems and the ‘no surcharge’ rule in the Visa Debit system), published by the Bank on 23 February 2005.

4.             Review

The Bank will monitor the impact of the access regime through its regular contact with industry participants.