Payment Systems (Regulation) Act 1998 - Interchange Fees in the EFTPOS System (November 2012)

Administered by Department of the Treasury

Legislation au F2013L00038 In force Legislative Instrument

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Payment Systems (Regulation) Act 1998

Interchange Fees in the EFTPOS System: Explanatory Statement

Background

The Reserve Bank of Australia (the Bank) initiated a review of the EFTPOS regulatory framework in early 2012 in order to ensure that its regulation continues to meet its objectives in light of changes that have occurred in the system in recent years. Those changes include a shift from a system characterised by bilateral agreements between participants to one that is centrally managed by eftpos Payments Australia Limited (ePAL).

Reflecting these changes to the system, the Bank updated its designation of the EFTPOS system in Designation No 1 of 2012 as the original designation (Designation No 2 of 2004) no longer clearly defined the system. The Standard titled The Setting of Interchange Fees in the EFTPOS System (‘the 2006 Standard’), determined for the system under the original designation, is therefore no longer appropriate.[1]

The Bank’s review of the EFTPOS regulatory framework included a review of whether the form of its regulation of EFTPOS interchange fees was still appropriate, given recent changes in the system. Previously, interchange fees in the EFTPOS system had been constrained between 4 and 5 cents paid to the acquirer. In recognition of ePAL’s capacity to set interchange fees in the interests of the system, in 2009 the Bank amended its regulation so that multilateral EFTPOS interchange fees (those set by ePAL itself) were subject to the same 12 cent cap – paid to the issuer – as that applying to the international debit schemes. Bilaterally negotiated fees in the EFTPOS system, however, remained constrained between 4 and 5 cents paid to the acquirer.

Most participants in the EFTPOS system have now adopted multilateral fees. In line with this, the Bank decided in November 2012 that it is appropriate for bilaterally negotiated fees to be subject to a similar cap to multilateral fees. To give effect to this decision, it is necessary to revoke the 2006 Standard (based on the 2004 designation, Designation No 2 of 2004) and put in place a new Standard (i.e. applying to the system designated in Designation No 1 of 2012).

Purpose and Operation

The purpose of the Standard Interchange Fees in the EFTPOS System (‘the Standard’) is to promote competition and efficiency in the Australian payments system by ensuring that interchange fees in the EFTPOS system can be set within similar regulatory constraints to the other debit card systems.

The practical effect of the Standard, when combined with revocation of the Standard The Setting of Interchange Fees in the EFTPOS System as applied to the EFTPOS system designated in Designation No 2 of 2004, is to:

  • apply regulation of the EFTPOS system to the system governed by the rules of EFTPOS Payments Australia Limited, in place of the system governed by the rules in the CECS manual for the Consumer Electronic Clearing System
  • remove the requirement under the 2006 Standard for bilateral interchange fees in the EFTPOS system to be between 4 and 5 cents paid to the acquirer, and
  • replace this with a requirement for bilateral fees to not exceed the benchmark set for the Visa Debit System – currently 12 cents paid to the issuer.

The weighted average of multilateral interchange fees in the EFTPOS system is also capped at the Visa Debit benchmark (as it was under the 2006 Standard). In addition, the Standard requires transparency of EFTPOS interchange fees, and introduces a requirement for ePAL to certify annually to the Bank that it has complied with the Standard.

The Standard will take effect on 1 July 2013.

Consultation

The Bank first announced in September 2011 that it would review aspects of the regulatory framework for the EFTPOS system to ensure that it continues to meet its objectives. In line with this, the Bank invited submissions on two consultation documents. The first, published on 9 March 2012, sought views on the appropriate form of designation for the EFTPOS system to reflect recent changes, and invited submissions from interested parties by 20 April 2012. After considering the views expressed during that consultation, the second consultation document was published on 12 June 2012, and submissions were invited by 31 July 2012. The June 2012 document outlined the Board’s decision on designation and possible options for the future regulatory framework for the EFTPOS system. After taking into account views expressed during consultation, a document detailing the final reforms was published on 29 November 2012.

Statement of Compatibility with Human Rights

For the purpose of the Human Rights (Parliamentary Scrutiny) Act 2011, section 42 (disallowance) of the Legislative Instruments Act 2003 does not apply to determinations of standards under section 18 of the Payment Systems (Regulation) Act 1998.

Documents

  • RBA (2012), Review of the Regulatory Framework for the eftpos System: Consultation on Designation, March.

Available at <http://www.rba.gov.au/publications/consultations/201203-replacing-eftpos-designation/index.html>.

  • RBA (2012), Review of the Regulatory Framework for the EFTPOS System: Consultation on Options for Reform, June.

Available at <http://www.rba.gov.au/publications/consultations/201206-rev-reg-frmwrk-eftpos-sys/index.html>.

  • RBA (2012), The Regulatory Framework for the EFTPOS System: Final Reforms and Regulation Impact Statement, November.

Available at <http://www.rba.gov.au/payments-system/reforms/debit-card-systems/
201211-reg-frmwrk-eftpos-sys/index.html>.

Reserve Bank of Australia

SYDNEY

20 December 2012

[1]  As a technical matter, the original designation is in place concurrently with the new designation and will not be revoked until the broader EFTPOS regulatory framework has been implemented. This avoids a period without any EFTPOS regulation in force.

Overview

The Payment Systems (Regulation) Act 1998 was enacted to ensure the regulation of payment systems in Australia meets its intended objectives, thereby promoting competition and efficiency. The legislation was enacted by the Australian Parliament, with the aim of addressing issues in the payment systems landscape, including the need for a clear regulatory framework that can adapt to changes in the industry. The Act provides the Reserve Bank of Australia (the Bank) with the authority to designate payment systems and regulate certain aspects of these systems, including interchange fees. In light of recent changes in the EFTPOS system, the Bank initiated a review of the regulatory framework to ensure it continues to be appropriate and effective. This led to the introduction of the Standard Interchange Fees in the EFTPOS System, which aims to promote competition and efficiency by aligning the regulatory constraints of EFTPOS interchange fees with those of other debit card systems. The Standard, which took effect on 1 July 2013, revokes the previous Standard and introduces a new regulatory regime for the EFTPOS system. It removes the requirement for bilateral interchange fees to be between 4 and 5 cents paid to the acquirer and replaces this with a requirement for bilateral fees not to exceed the benchmark set for the Visa Debit System, currently 12 cents paid to the issuer. Additionally, the Standard requires transparency of EFTPOS interchange fees and mandates annual certification by ePAL to the Bank of compliance with the Standard. The new Standard reflects the shift from a system of bilateral agreements to one centrally managed by ePAL, ensuring that the regulatory framework remains relevant and effective in promoting competition and efficiency in the Australian payments system.

Scope and Application

The Payment Systems (Regulation) Act 1998 applies to the regulation of payment systems in Australia, with a particular focus on the setting of interchange fees within the EFTPOS system. The Act empowers the Reserve Bank of Australia to designate payment systems and to determine standards for these systems, including interchange fees. The EFTPOS system, managed by eftpos Payments Australia Limited (ePAL), is the subject of the Standard Interchange Fees in the EFTPOS System, which aims to ensure that interchange fees in this system are set within similar regulatory constraints as those applied to other debit card systems. The new Standard, which replaces the previous 2006 Standard, applies to the EFTPOS system as designated in Designation No 1 of 2012, and takes effect from 1 July 2013. The Standard removes the previous cap on bilateral interchange fees, aligning them with the cap on multilateral fees set at 12 cents paid to the issuer, and introduces requirements for transparency and annual certification of compliance by ePAL. The application of the Standard is national in scope, impacting all participants within the EFTPOS system across Australia.

Key Provisions

The key sections of the legislation, Interchange Fees in the EFTPOS System, primarily revolve around the regulation of interchange fees in the EFTPOS system, now centrally managed by eftpos Payments Australia Limited (ePAL). Section 18 of the Payment Systems (Regulation) Act 1998 (the Act) empowers the Reserve Bank of Australia (the Bank) to determine standards for payment systems, including interchange fees, and this is exercised through the Standard Interchange Fees in the EFTPOS System. Section 42 of the Legislative Instruments Act 2003 exempts these determinations from disallowance under the Human Rights (Parliamentary Scrutiny) Act 2011. The Standard, which came into effect on 1 July 2013, replaces the previous 2006 Standard, aligning the regulatory framework with the current system designation and removing the previous cap on bilateral fees, now set at the Visa Debit benchmark of 12 cents paid to the issuer. The obligations imposed by the Act on the relevant parties, particularly ePAL, include ensuring that interchange fees do not exceed the specified benchmarks, both for multilateral and bilateral fees. ePAL is also required to certify annually to the Bank that it has complied with the Standard. This annual certification process is intended to enhance transparency and accountability in fee setting, ensuring that the system remains competitive and efficient. The Bank retains the authority to review and enforce compliance with these standards, thereby maintaining its regulatory oversight. Failure to comply with the Standard can lead to significant consequences. While the legislation does not explicitly outline specific penalties, non-compliance could potentially result in enforcement actions by the Bank. Such actions could include financial penalties, public reprimands, or further regulatory scrutiny. The maximum penalties, if applicable, would depend on the severity and nature of the non-compliance and would be determined by the Bank in accordance with its regulatory powers under the Act. This oversight mechanism ensures that the regulatory framework remains robust and effective in promoting a competitive and efficient EFTPOS system.

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Financial Services Regulation
Competition Law
Instrument
Regulation
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Definitions & Interpretation
Regulatory Standards
Reporting & Disclosure Obligations
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.