Payment Systems (Regulation) Act 1998
Variation to the Access Regime for the ATM System: Explanatory Statement
Background
In 2009, the Reserve Bank put in place the Access Regime for the ATM System (the Access Regime) as part of a broader set of industry-led reforms to improve efficiency and competition in the ATM system. Among other elements, the Access Regime prohibits the payment of interchange fees between participants in the ATM system except in two sets of circumstances – where a common multilateral interchange fee is paid between members of an ATM sub-network, and where a fee is paid in respect of a ‘one-way arrangement’ (paragraph 11).
The Bank considered these exceptions to benefit competition by allowing smaller financial institutions to provide their cardholders with direct charge-free access to a larger network of ATMs than they would be able to provide themselves. At the same time, the Bank sought to avoid the possibility that these exceptions would lead to the redevelopment of a network of bilateral interchange fees. The Access Regime therefore prevents an issuer from putting in place more than a single one-way arrangement, and from being both a payer and receiver of interchange fees under one-way arrangements (see paragraph 12).
At the same time, the Bank recognised that it would be desirable to have some additional flexibility over the prohibition on interchange fees. The Access Regime therefore included a provision that allows the Bank to grant an exemption to the prohibition on the payment of interchange fees under paragraph 11 where it is satisfied that the exemption is appropriate, having regard to the public interest, the interest of current and potential future participants, and any other matters the Reserve Bank considers relevant. That exemption power, however, did not extend to the prohibition on a participant being both a payer and receiver of interchange fees under one-way arrangements under paragraph 12.
Following consultation, the Bank has formed the view that the original exemption power was too narrow. In particular, it has become aware of possible circumstances where an ATM market participant may be both a payer and receiver of interchange fees under one-way arrangements and where such an arrangement is consistent with the objective of the Access Regime. The current variation therefore extends the Bank’s exemption power in order for it to permit a participant to be both a payer and receiver of interchange fees under one-way arrangements.
Purpose and Effect
The purpose of the variation to the Access Regime is to improve efficiency and competition in the ATM system by providing the Reserve Bank with more flexibility to facilitate ATM arrangements that it considers appropriate. The Access Regime continues to set out the factors that the Bank will have regard to in deciding whether an exemption is appropriate – the public interest, the interest of current and potential future participants in the system, and any other matters that the Reserve Bank considers relevant.
The variation has the effect of extending the Reserve Bank’s exemption powers under the Access Regime, thereby enabling it to facilitate ATM arrangements involving a participant that both pays and receives interchange fees in one-way arrangements. This makes the process of dealing with otherwise prohibited ATM arrangements that are consistent with the objective of the Access Regime more streamlined, compared with the alternative means of facilitating such arrangements by varying the Access Regime on a case-by-case basis.
Consultation
A draft variation to the Access Regime was released for consultation on 29 May 2012; the Bank requested submissions from interested parties by 13 July 2012.
The rationale for the variation is discussed in more detail in A Variation to the Access Regime for the ATM System: Conclusions, which summarises the various arguments made during the consultation process and the Bank's reasoning in coming to its decision.
Documents
- Reserve Bank of Australia (RBA) (2012), A Variation to the Access Regime for the ATM System: Consultation Document, May.
Available at <http://www.rba.gov.au/publications/consultations/201205-acc-reg-atm-sys-cons-doc/index.html>.
- RBA (2012), A Variation to the Access Regime for the ATM System: Conclusions, August.
Available at <http://www.rba.gov.au/payments-system/reforms/atm/var-access-regime/
index.html>.
Reserve Bank of Australia
SYDNEY
29 August 2012
Overview
The Payment Systems (Regulation) Act 1998 was enacted to regulate payment systems in Australia, ensuring they are safe, efficient, and accessible. The Act addresses the need for a regulatory framework to oversee and manage the various payment systems used in Australia, aiming to protect consumers and promote competition. Enacted by the Australian Parliament, the Act empowers the Reserve Bank of Australia (RBA) to establish and enforce regulations that maintain the integrity of the payment systems. The policy objective of the Act is to provide a robust regulatory environment that fosters innovation and efficiency in the payment systems sector while safeguarding the interests of consumers and participants in the financial system. In this context, the Access Regime for the ATM System was introduced to improve efficiency and competition within the ATM network, and the recent variation to this regime seeks to enhance the flexibility of the RBA in managing ATM arrangements.
Scope and Application
The Payment Systems (Regulation) Act 1998 applies to entities participating in the ATM system in Australia, specifically focusing on the payment of interchange fees among participants. The Act is administered by the Reserve Bank of Australia, which is responsible for the regulation of payment systems under the Commonwealth jurisdiction. The Act aims to regulate payment systems to ensure they operate efficiently and competitively while protecting the interests of consumers and participants in the system. The Access Regime, a component of this Act, governs the conditions under which interchange fees can be charged and sets out specific circumstances where such fees are either prohibited or permitted. The variation to the Access Regime extends the Reserve Bank's exemption powers, allowing it to permit participants to be both payers and receivers of interchange fees under one-way arrangements, thereby facilitating more streamlined processes for ATM arrangements that align with the objectives of the Access Regime. This variation does not alter the fundamental factors the Reserve Bank must consider when granting exemptions, such as the public interest and the interests of current and potential participants in the system.
Key Provisions
The Payment Systems (Regulation) Act 1998, specifically in relation to the Access Regime for the ATM System, includes several key sections that dictate the operation of ATM networks in Australia. Section 3A(1) of the Act details the prohibition on the payment of interchange fees between ATM system participants, except under specific conditions outlined in the Access Regime (section 3A(1)(a)). The Access Regime allows for interchange fees in the case of a common multilateral interchange fee between members of an ATM sub-network and where a fee is paid in respect of a ‘one-way arrangement’ (section 3A(1)(b)). The Act also stipulates that a participant cannot be both a payer and receiver of interchange fees under one-way arrangements (section 3A(1)(c)). However, section 3A(2) grants the Reserve Bank the power to exempt certain participants from this prohibition if it is satisfied that the exemption aligns with the public interest, the interests of current and potential future participants, and any other relevant considerations.
Under the Access Regime, parties governed by the Act are obligated to adhere to the established rules regarding interchange fees and one-way arrangements. Financial institutions must ensure compliance with the prohibitions and conditions set out in the Act, which includes not paying interchange fees unless under the permitted exceptions. Additionally, entities must avoid configurations that would see them both paying and receiving interchange fees in one-way arrangements unless an exemption has been granted by the Reserve Bank. This obligation extends to providing accurate and timely information to the Reserve Bank when seeking exemptions or when affected by changes to the Access Regime.
Breaches of the provisions within the Payment Systems (Regulation) Act 1998 can result in significant legal consequences. Section 14 of the Act stipulates that contravening the provisions of the Act is an offence, with penalties that can include substantial fines. The exact penalties are not specified within the explanatory statement, but generally, contraventions of regulatory provisions under Australian legislation can result in fines up to thousands of dollars, depending on the severity and impact of the breach. In addition to criminal penalties, entities found to be in breach may also face civil actions, which could include compensation claims or other remedies to address the harm caused by non-compliance. These consequences underscore the importance of adherence to the regulatory framework established by the Access Regime.