Review of Payments
System Reforms
Michele Bullock
Head of Payments Policy
Reserve Bank of Australia
Overview
1. Scope of the review
2. What issues are being addressed?
3. Developments since the reforms?
4. Progress on the studies
5. Where to from here?
Scope
‰ Credit cards
‰ EFTPOS
‰ Scheme debit
‰ American Express/Diners Club
‰ BPAY
‰ ATMs
The Issues
Source: The Australian
What are the Issues?
‰ Effects of the reforms?
‰ Alternatives to regulation?
‰ Changes to current regulations?
Developments
‰ In the market?
‰ Overseas?
‰ Analysis?
Non-cash Payments per Capita*
Per year
No
No
60
60
Cheques
Credit cards
50
50
Debit cards
40
Direct credits
40
30
30
20
20
Direct debits
10
10
BPAY
0
1994
1996
1998
2000
2002
2004
2006
*Debit and credit card data prior to 2002 have been adjusted for a break in the
series due to an expansion in the coverage of the Retail Payments Statistics in
2002.
Sources: ABS; APCA; BPAY; RBA
0
Number of Card Payments
Year-on-year growth
%
%
30
30
Credit
20
20
Debit
10
10
0
0
1997
Source: RBA
1999
2001
2003
2005
2007
Market Shares of Card Schemes
By value of purchases
%
%
Bankcard, MasterCard and Visa
90
90
85
85
%
%
American Express and Diners Club
15
15
10
10
5
2002
Source: RBA
2003
2004
2005
2006
2007
5
Merchants Surcharging Credit Cards*
Per cent of surveyed merchants
%
%
12
12
Very large
merchants
Large merchants
8
8
Small merchants
4
4
Very small
merchants
0
Jun 2005
Dec 2005
Jun 2006
Dec 2006
0
* Very large merchants are those with turnover greater than $340 million, large
merchants $20 million to $340 million, small merchants $5 million to $20 million
and very small merchants $1 million to $5 million.
Source: East & Partners Pty Ltd
Interchange Fees on a $100 Payment
Exclusive of GST
Merchant's bank
Cardholder's bank
Credit cards
Scheme debit
EFTPOS
Pre reform
Post reform
-0.6
-0.4
Source: RBA
-0.2
0
0.2
0.4
0.6
0.8
$
Merchant Service Fees
Per cent of transaction values acquired
%
%
American Express
2.5
2.5
Diners Club
2.0
2.0
1.5
1.5
1.0
1.0
Bankcard, MasterCard and Visa
0.5
0.5
0.0
0.0
2003
Source: RBA
2004
2005
2006
2007
Credit Card Rewards Programs
Four major banks
Average spending required
for $100 voucher
Benefit to cardholder as a
proportion of spending (bp)
2003
12 400
81
2004
14 400
69
2005
15 100
66
2006
16 000
63
2007
16 200
62
Sources: Banks websites, ANZ Telstra Rewards Visa Card, Commonwealth Bank
MasterCard Awards card, National Australia Bank Visa Gold card, Westpac Altitude
MasterCard.
The Studies
‰ Use of payment instruments
– Cash still important
– Industry specific patterns
‰ Costs of payment instruments
Where To Now?
‰ Submissions 31 August
‰ Conference 29 November
‰ Draft conclusions April 2008
‰ Standards/Access Regimes end 2008