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.
Reserve Bank of Australia
SYDNEY
11 January 2023
Overview
The Payment Systems (Regulation) Act 1998 was enacted to provide the Reserve Bank of Australia with the authority to regulate designated payment systems, ensuring they operate efficiently and fairly. This legislation was introduced to address issues of market access and competition within the Australian financial services sector. Specifically, it empowers the Reserve Bank to impose access regimes that prevent discrimination and promote competition among participants in designated payment systems, such as credit and debit card schemes. The Reserve Bank of Australia, as the enacting body, aims to facilitate the participation of a diverse range of institutions in these systems, thereby enhancing the overall efficiency and competitiveness of the payment services market. The explanatory statement regarding the access regime for the Visa Debit system indicates that the policy objective is to ensure that Specialist Credit Card Institutions (SCCIs) can participate in both Visa credit and debit card systems, promoting market diversity and competition.
Scope and Application
The Reserve Bank of Australia Payment Systems (Regulation) Act 1998 applies to the participants in the designated Visa Debit system within Australia, with the purpose of ensuring that Specialist Credit Card Institutions (SCCIs) are eligible to participate in the Visa Debit system as well as the Visa credit card system. The Act allows the Reserve Bank to impose an access regime on a designated payment system to achieve this purpose. The access regime ensures that SCCIs can join the Visa scheme to undertake both credit and debit card transactions, facilitating participation of institutions that specialise in card issuing, acquiring or both, but do not conduct other banking business. This promotes efficiency and competition in the provision of card payment services to merchants and cardholders. The Act extends its application through subordinate instruments, such as draft Standard No. 5, which provides definitions for terms used within the Act. There are no stated exclusions, exemptions, or thresholds within the text of the Act.
Key Provisions
The main provisions of the Payment Systems (Regulation) Act 1998, specifically as they pertain to the Visa Debit system, are detailed in sections 1 to 4 of the explanatory statement. Section 1 provides the background of the Act, stating that it empowers the Reserve Bank of Australia to impose an access regime on participants in designated payment systems, with the Visa Debit system being the most recent addition to the list of such systems. Section 2 outlines the purpose and operation of this access regime, which is to ensure that Specialist Credit Card Institutions (SCCIs) are eligible to participate in the Visa Debit system, thus facilitating their ability to conduct both credit and debit card transactions. Section 3 details the consultation process undertaken by the Reserve Bank, including the release of a Consultation Document and the subsequent receipt of feedback from interested parties. Section 4 covers the review process, indicating that the Bank will monitor the impact of the access regime through regular contact with industry participants.
The Act imposes several obligations and requirements on the parties involved in the Visa Debit system. Firstly, the Reserve Bank must ensure that SCCIs are not discriminated against in their attempt to join the Visa Debit system, aligning with the existing prohibitions on discrimination in the Visa credit card system. Secondly, Visa, as the operator of the Visa Debit system, must comply with the access regime imposed by the Reserve Bank. This includes ensuring that its rules and practices do not prevent SCCIs from joining the Visa Debit system. Thirdly, any institution wishing to participate in the Visa Debit system must adhere to the criteria set forth in the access regime, which includes being eligible to participate as per the definitions and conditions specified by the Reserve Bank.
Breaches of the access regime imposed by the Reserve Bank of Australia under the Payment Systems (Regulation) Act 1998 can result in various civil or criminal consequences. While the Act does not explicitly state maximum penalties for breaches, it is understood that failure to comply with the imposed regime could lead to legal actions against the offending party. The Reserve Bank may take enforcement actions, which could include fines or other penalties as prescribed by relevant legislation. Additionally, Visa or any other participant found in breach of the regime may face legal repercussions, potentially leading to lawsuits from affected SCCIs or other institutions. It is also possible that non-compliance could result in reputational damage, impacting the institution's ability to operate within the Australian financial services sector.