Consultation on the Operation of the Bank’s Interchange Standards
The Reserve Bank today issued a consultation paper seeking stakeholder views on some proposed variations to Standards No 1 and No 2 determined by the Bank in 2016. Both standards relate to the setting of interchange fees in designated card schemes and net payments to issuers in those schemes.
In 2015-16, the Bank conducted a review of its card payments regulation which concluded with new standards relating to interchange fees and merchant pricing in designated card schemes. The interchange standards introduced new requirements relating to the payment of ‘net compensation’ to issuers. These requirements were designed to prevent the caps placed on interchange fees being circumvented by arrangements involving non-interchange payments or other incentives being provided by schemes to issuers.
Under the standards, schemes and issuers in designated schemes are required to certify to the Bank annually that they have complied with the net compensation provision. The initial certifications were provided to the Bank in August 2018. This initial certification process indicated that the new standards were working as intended from a broad policy perspective. However, it also suggested that there were some issues with the interpretation of the net compensation provision that might benefit from some clarification, and areas where some potential minor variations to the standards might be beneficial.
Accordingly, the Bank sought informal views from stakeholders on the operation of the net compensation requirement. This included views on how the requirement could be modified to improve clarity, minimise compliance burden, or otherwise support the operation of the standards, without changing their purpose or substantive effect. In November, the Payments System Board reviewed possible options to clarify the operation of the net compensation provisions, and directed the Bank to draft variations to the standards for consultation with stakeholders.
This consultation paper describes the issues where stakeholders have sought clarification and guidance or suggested changes to the standards, and sets out the Bank’s proposed options to address them. The consultation paper will mainly be of interest to issuers and schemes that are subject to the standards.
The Bank invites interested parties to provide their views in writing on the consultation paper and draft variations to the standards by 28 March 2019.
