Defined Terms and Documents       

To Act In The Public Interest  or The Public Interest Test

Below are pertinent extracts from the Payment Systems (Regulation) Act 1998:

public interest has the meaning given by section 8.

8 Meaning of public interest

In determining, for the purposes of this Act, if particular action is or would be in, or contrary to, the public interest, the Reserve Bank is to have regard to the desirability of payment systems:

(a) being (in its opinion):

(i) financially safe for use by participants; and

(ii) efficient; and

(iii) competitive; and

(b) not (in its opinion) materially causing or contributing to increased risk to the financial system.

The Reserve Bank may have regard to other matters that it considers are relevant, but is not required to do so.

Division 2—Designation of payment systems

11 Reserve Bank may designate payment systems

(1) The Reserve Bank may designate a payment system if it considers that designating the system is in the public interest. The designation is to be by notice in writing published in the Gazette.

(2) The designation has effect until it is revoked.

(3) The Reserve Bank may revoke the designation if it no longer considers that it is in the public interest that the system be designated. 

Division 3—Access to designated systems

Subdivision A—Access regimes

12 Imposition of access regime

(1) The Reserve Bank may impose an access regime on the participants in a designated payment system.

(2) The access regime imposed must be one that the Reserve Bank considers appropriate, having regard to:

(a) whether imposing the access regime would be in the public interest; and

(b) the interests of the current participants in the system; and

(c) the interests of people who, in the future, may want access to the system; and

(d) any other matters the Reserve Bank considers relevant.

(3) The Reserve Bank must not impose the access regime unless it has first consulted in accordance with section 28.

(4) The decision to impose the access regime is to be in writing and is to set out the access regime.

(5) As soon as practicable after imposing the access regime, the Reserve Bank must provide notification under section 29.

(6) A failure to comply with subsection (5) does not affect the validity of the access regime.

 

Division 4—Standards for designated systems

18 Reserve Bank may make standards for designated systems

(1) The Reserve Bank may, in writing, determine standards to be complied with by participants in a designated payment system if it considers that determining the standards is in the public interest.

Below are quotes from Submission to the Review of Innovation in the Regulatory Framework for the EFTPOS System: Consultation on Designation - 20 April 2012 by Tyro Payments Limited which is -

(i)        a Specialist Credit Card Institution authorised by APRA; and

(ii)       Australia’s independent provider of acquiring services for credit, scheme debit and EFTPOS cards and electronic Medicare processing services for patient paid and bulk-bill claims,

that remind the Reserve Bank of its obligations (under Section 8 of the Payments System Regulation Act 1998), To Act In The Public Interest:

"It is Tyro’s submission that:

1. The RBA must continue to designate EFTPOS and use its statutory powers to issue appropriate standards in the public interest that will control risk and promote efficiency and competition in the EFTPOS debit card system.

Self-regulation is ineffective in an oligopolistic industry

The Payment Systems Board is charged with ensuring the safety, efficiency and competitiveness of payment systems such as EFTPOS for the public benefit. It is only the RBA that has such powers and the legal obligation and perspective to act solely in the public interest.

As far as the domestic debit card system is concerned, nobody but the Reserve Bank of Australia should mandate the outcomes, standards and access of the payment system. Eftpos Payment Australia Limited (ePAL) is unsuited to be entrusted with this role, since it is -
•     not a company charged with the statutory duty to act in the public interest;

•     not transparent nor inclusive of non-member participants of EFTPOS; and is

•     de jure and de facto dominated by the major banks.

It is of significance that the RBA designated EFTPOS after the Australian Competition Tribunal had found that the zero interchange fees for EFTPOS proposed by the banks and financial institutions was contrary to the public interest.

Designating EFTPOS by reference to rules that are not

•     transparent,

•     established after consultation with all participants;

•     set in the interests of all participants; or

•     open for comment or change by all EFTPOS participants is contrary to public interest.

These participants could thus be covered by rules that are not covered by the ePAL scheme and reflect the specificities of those smaller participants pursuing a specific role that is clearly in the public interest."

Below is an extract from ACCC recommends Reserve Bank consider using powers to reform credit card schemes  -  21 March 2001 telling the RBA 'To Act In The Public Interest':

"Under the Payment Systems (Regulation) Act 1998, which is the responsibility of the Payments System Board of the Reserve Bank, the Reserve Bank can 'designate' a payment system where it considers it to be in the public interest to do so. The Reserve Bank then has the power to impose an access regime and/or to set standards, including arrangements for the setting of interchange fees, with respect to the operation of the designated system. The Reserve Bank is required to engage in a public consultation process before imposing an access regime or setting a standard."

ACCC is also obligated 'To Act In The Public Interest'. 

The Chairman of the ACCC wrote to the Governor of the Reserve Bank in March 2001 recommending that the Payments System Board consider using the powers available to it, under the Payment Systems (Regulation) Act 1998, to achieve reform of the credit card schemes in Australia in the public interest.  After consultation with a range of interested parties, the Board took the decision to bring credit card schemes in Australia under the Reserve Bank's regulatory oversight.  In April 2001, the Reserve Bank formally ‘designated’ the credit card systems operated in Australia by Bankcard, MasterCard and Visa as payment systems subject to its regulation under the Payment Systems (Regulation) Act 1998.

The BANKING ACT 1959 Division 5—Advances  - SECT 36 Advance policy notes:

  "(1)

Where the Reserve Bank is satisfied that it is necessary or expedient to do so in the public interest, the Reserve Bank may determine the policy in relation to advances to be followed by ADIs.

"

Wholesale Supply Side  means 'parties' under the Four-Party Schemes and Three-Party Schemes, except Credit Cardholders, together with the particular Credit Card Payment Scheme. 

All 'parties' except Australia's 7,515,000 circa Credit Cardholders (aged 18 or over) as at June 2016, have powerful lobby groups to Argy Bargy reasonably equitable pricing.  Under the Retail Supply Side,  Australia' Three Financial Services Regulators are statuted to Argy Bargy reasonably equitable pricing for Credit Cardholders To Act In The Public Interest.

Below is an extract from RBA's Reform of Credit Card Schemes in Australia:  "A Consultation Document" – Dec 2001"

1.5    The public interest test - page 10

The Reserve Bank may use its powers to impose an access regime or determine a standard if it is in the public interest to do so. The public interest test is the critical test for any intervention in the normal competitive processes of the market, whether it be proposed action by regulatory authorities or potentially anti-competitive conduct by market participants (which must be authorised under the Trade Practices Act 1974). The designated major credit card schemes have already established their own regulatory framework, in the form of rules and procedures agreed collectively by the respective scheme members that are otherwise competitors in the provision of credit card services. This regulatory framework is unique: in no other market in Australia are competitors permitted, without authorisation under the Trade Practices Act 1974, to act collectively to set wholesale prices, prohibit merchants from passing on these prices and restrict entry to the market in a way that substantially lessens competition. The regulatory framework of the credit card schemes benefits the schemes and their members, as well as credit cardholders; however, the Joint Study raised serious doubts about whether the community as a whole also benefits. For this reason, the Reserve Bank's starting point has been to assess whether the regulations of the credit card schemes themselves can meet the public interest test.

The Payment Systems (Regulation) Act 1998 provides the relevant definition of the public interest. The Reserve Bank is to have regard to the desirability of payment systems:

1. ‘being (in its opinion):

   1. financially safe for use by participants; and

   2. efficient; and

   3. competitive; and

2. not (in its opinion) materially causing or contributing to increased risk to the financial system.

The Reserve Bank may have regard to other matters that it considers are relevant, but is not required to do so.’

In applying this public interest test, the Reserve Bank's approach is consistent with the broad objectives of competition policy in Australia. The blueprint for this policy was set out in the report of the National Competition Policy Review (the Hilmer Report) in 1993 and endorsed by Federal and State Governments at Council of Australian Governments (COAG) meetings in 1994. Broadly speaking, competition policy seeks to promote efficiency and enhance community welfare through the encouragement of effective competition and the protection of the competitive process. The Hilmer Report identified three dimensions of economic efficiency, which are as relevant to markets for payment services as they are to other markets for goods and services:[⁴]

• allocative efficiency, which is achieved where resources are allocated to their highest valued uses (ie those that produce the greatest benefit relative to costs);

• productive efficiency, which is achieved where firms produce goods and services at minimum costs; and

• dynamic efficiency, which reflects the need for industries to make timely changes to technology and products in response to changes in consumer tastes and in productive opportunities.

If it is to meet the broad objectives of competition policy, the payments system in Australia needs to give maximum rein to the workings of the price mechanism and the free movement of resources, provided the safety of the system is not compromised. For this reason, the Reserve Bank sees the following competition ‘benchmarks’ as underpinning the public interest test in the payments system:

• relative prices charged by financial institutions to consumers who use payment instruments should reflect the relative costs of providing these instruments as well as demand conditions;

• merchants should be free to set prices for customers that promote the competitiveness of their business;

• prices of payment instruments should be transparent;

• any restrictions on the entry of institutions to a payment system should be the minimum necessary for the safe operation of that system; and

• competition within the market for a payment instrument, and between different payment instruments, should be open and effective.

If markets for payment services meet these benchmarks, the community can be confident that the price mechanism will allocate resources efficiently to meet the demand for different payment instruments, while the ‘contestability’ of the markets – that is, the threat of entry by new competitors – would ensure that payment service providers earned no more than a competitive return on their investments over time.

Even within a competitive environment, there is likely to be a role for private-sector regulations to ensure the safe and orderly operation of a payment system. However, if such regulations suppress or distort the normal market mechanisms, the onus must be on those institutions imposing the regulations to demonstrate that community welfare is not harmed.

Below is an extract from page vi of the Executive Summary of RBA's Reform of Credit Card Schemes in Australia:  "A Consultation Document" – Dec 2001":

Refer:

Determine Standards to 'inter alia' re-cap Credit Card interest rates for 'public interest issues'