RBA's recent Review of Card Payments Regulation - Conclusions Paper - May 2016 - Section 3.4.9 Implementation timeline noted that -

(i)        the weighted-average benchmark for Visa/MasterCard credit cards -

            (A)        of 0.50 per cent will be maintained

            (B)        will be supplemented by a ceiling (on individual interchange rates) of 0.80 per cent

(ii)       to prevent Interchange Fees drifting upwards in the manner that they have previously, compliance with the benchmark will be observed quarterly rather than every three years.  Visa or MasterCard will be required to reset its interchange schedule in the event that its average interchange fee over the previous four-quarter period exceeds the benchmark.

(iv)      the new interchange benchmarks will take effect from 1 July 2017.

Will the Reserve Bank explain to the Treasurer -

(i)       why it allow Credit Card Issuers to charge as low as 0.20% and as high as 2% to perform the same Interchange Fees Services; and

(ii)       how it will observe that Visa/MasterCard Payment Schemes will comply with (i)(A) and (i)(B) above?

Grounds for Question 8

Chapter 18 provides extensive information and RBA graphs re Interchange Fees.  Graph No 6 therein evidences that -

*           Credit Card Interchange Fees range from 0.20% to 2%; and

*           the range of Interchange Fees has broadened materially and progressively over the last 13 years. 

The Reserve Bank imposed interchange fee Standards that placed a cap on weighted-average Interchange Fees for the MasterCard and Visa credit card schemes (which came into effect in 2003).  In 2006 the PSB set the weighted-average benchmark for Interchange Fees at 0.50 per cent for Visa/MasterCard credit cards.  Ten years later this weighted-average benchmark remains at 0.50 per cent.

RBA's Review of Card Payments Regulation - Conclusions Paper - May 2016 - Section 3.4.8 Changes to benchmark compliance noted:

"When the benchmarks for credit card interchange fees were introduced in 2003, the Board’s aim was to limit the tendency for competition between schemes to drive up interchange fees. By setting the benchmarks in weighted average terms, the Bank allowed schemes significant flexibility to set different interchange fees for different transactions, some of which could be over the benchmark.  Schemes have taken advantage of this, and of the current infrequent compliance arrangements, to develop commercial strategies that encourage issuers to maximise interchange revenue. The result has been that actual average interchange fees have tended to be higher than the regulatory benchmark and have drifted further above the benchmark between the three yearly compliance points. Accordingly, the benchmark has not represented an effective cap on average interchange fees."