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Interchange fees still on RBA radar

Interchange fees still on RBA radar

(30 September 2008 – Australia) The RBA has released the conclusions to its review of payments systems reform, highlighting interchange fees and the competitive forces required over the coming year. The Payments System Board found that reforms have significantly improved competition in the Australian payments system.

In particular, the board said that the reforms have liberalised access and removed restrictions on merchants that had weakened competition in the system.

It also said that the reforms have increased transparency and have led to more appropriate price signals to consumers.

The board concluded that it is therefore prepared to step back from regulation on interchange fees, but only if industry participants can reduce the risk that deregulated interchange fees would increase from current levels.

This is due to the board’s ongoing concern that, despite the improvements over recent years, the competitive forces acting on interchange fees remain relatively weak.

The RBA said that rising fees could be addressed by the schemes providing a commitment to limit their average interchange fees to current levels.

A final decision will be made in August 2009. If at that time the board judges that insufficient progress has been made by the market in the reduction of interchange fees, interchange regulation will be retained.

The regulation benchmark for credit card interchange fees would be reduced from its current level of 0.5 percent to 0.3 percent in the case of retained regulation.
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