Australia's Reserve Bank Finalizes Debit Interchange Reforms

The reforms to the debit card systems have been developed over a number of years and follow extensive consultation with a wide range of interested parties. Broadly, the reforms involve:

• the adoption of a cap and floor on interchange fees in the EFTPOS system, with the result that these fees, which are paid by financial institutions that issue EFTPOS cards, are likely to fall to around 4 to 5 cents per transaction, from an average of around 20 cents currently;
• the adoption of a cap on the weighted-average interchange fee in the Visa Debit system, with the result that interchange fees in the Visa Debit system, which are paid to financial institutions that issue Visa Debit cards, are likely to fall to an average of around 15 cents per transaction, from around 40 cents currently;
• requiring the Visa system to remove the restrictions on merchants that require them to accept Visa Debit cards if they accept Visa credit cards, and that prohibit merchants from imposing a surcharge on Visa Debit transactions; and
• the adoption of a cap on the price that existing participants in the EFTPOS system can charge new and existing participants for establishing a connection.

These reforms and their rationale are discussed in detail in the attached Regulation Impact Statement. The reforms are substantially the same as those released in the February and December 2005 Consultation Documents, although some changes have been made, reflecting views put through the consultation process.