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No news is pretty good news, or so most of the industry thinks.

In July 2009’s Monitor, I was anticipating the Payments System Board’s (PSB) final decision on the long-running card interchange fee saga, due in August 2009. As it turned out, we didn’t quite get one. APCA had argued for deregulation of interchange fees, along with most financial institutions, on the basis that competitive forces could and should be allowed to take over. The alternative was tighter price controls, if the PSB formed the view that competition in consumer payments would never operate to constrain interchange fees.

The PSB did not feel that there was sufficient competition in consumer payments to step back from interchange fee regulation, and it was not happy with the voluntary undertakings offered by the international schemes on credit card interchange. On the other hand, it recognised industry efforts towards increasing competition amongst retail payment instruments. So, it adopted a middle path: wait and see. Existing regulation stays in place, pending later review when the market evolution becomes clearer. In the meantime, the Reserve Bank has flagged the need for a little more tinkering to align the regulatory treatment of EFTPOS with international scheme debit.

That is all reasonable, and measured. But I can’t help feeling it’s a shame this debate is now to drag on for a further, unspecified period. The zero sum nature of the interchange fee debate is a source of divisiveness, even rancour, in industry dialogue. When it comes to interchange fees, issuer’s loss is acquirer’s (and usually merchant’s) gain, and vice versa. Policy positions are polarised, driven by the hip pocket nerve. Any extension of the debate on card interchange fees therefore has the potential to distract the industry from building consensus and moving on with broad system improvement that is in everyone’s interest.

EFTPOS Payments Australia Limited (EPAL), the new business development scheme for the EFTPOS network, is one important venue for potential future system improvement. Around that board table are representatives of financial institutions and big merchants as well as independent directors. I imagine debate is lively – but directors of all stripes are jointly committed to the health and growth of the EFTPOS system, and that is a great place to start. I wish them well.

Another, broader venue for industry debate is the Card Payments Forum, now just three meetings old. I am delighted with the willingness of senior, busy people from all facets of card payments to meet together, talk to and hear from the Reserve Bank as a group, and generally look for the common interest, rather than the source of division. So far, the debate had been lively, albeit the consensus modest. For example, there is recognition that fraud prevention is an industry priority, to which we will devote the next forum. It is my hope that if we can over time build a way of working together as an industry, this will be of great use in addressing future systemic challenges.

Moving from payment cards to electronic payments, there is even more promising emergent consensus, based on the Low Value Payments Roadmap (available on apca.com.au). With Telstra’s help, a new industry communications network has been established – the 'COIN' or Community of Interest Network. You can read about it and other developments in APCA’s Annual Review for 2009, just published on our website. I hope you find it useful.

 

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