RBA wants payment system reform

The Reserve Bank is pressuring debit card issuers to agree on reforms to support multi-network cards before "contactless" card technology complicates the sector further.

After meeting with card issuers on the subject Friday, the RBA's Payments System Board has asked the staff to "meet again with the parties involved to see if a voluntary agreement can be reached that is acceptable to all parties and also in the public interest."

Should no industry-wide agreement emerge in an ''expeditious manner,'' the RBA "has authorised a public consultation on the case for regulatory action."

At stake is whether Australia's eftpos debit system will be able to compete on price and branding with offshore behemoths Visa and MasterCard. Friday's meeting centred on how competing card networks would handle each other's commercially sensitive data, how fees are handled between rivals, as well as the placement of network brands on cards, the RBA said.

Debit cards like MasterCard's PayPass, Visa's Paywave, and similar products from e-Bay owned-PayPal effectively remove the network choice from the consumer by having it chosen by default. Currently on chip-based swipe cards, consumers can choose the "credit" option rather than "savings" or "cheque" options, which determines whether the transaction is handled by eftpos or the credit card companies. The race for mobile payment by the banks is also adding extra complexity to the payment system.

While the cost of choosing "credit" is typically cheaper for consumers, a higher cost is passed along to the merchants that provide the terminal, raising competition issues in the Australian market.

"Eftpos welcomes the announcement by the RBA regarding multi network debit cards," Eftpos managing director Bruce Mansfield said.

"We are very happy to embrace a voluntary agreement," he said. "We have been seeking this for some time."

The RBA acknowledging that banks and debit card issuers wanted 'rules of the game' to follow.

"Authorities in other jurisdictions have taken actions that are aimed at helping to ensure that the costs involved in debit card transactions are held down," according to a statement by the RBA's Payments System Board.

Fairfax understands the RBA is anxious to keep the domestic payment system viable in the face of global competition.

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The story RBA wants payment system reform first appeared on The Sydney Morning Herald.

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