Australia’s central bank is likely to continue regulating payment card interchange fees indefinitely, at least one analyst predicts.
Malcolm Edey, Reserve Bank of Australia assistant governor, on March 16 told attendees of a payment industry conference in Sydney that the central bank’s Payments System Board has not reached a decision on whether to pull back from direct regulation of interchange fees on credit cards.
The central bank intervened in the market in 2001 and has said it may eventually lift regulation. Edey said at the conference that the bank is a “reluctant regulator” and would prefer to see interchange fees determined by open-market competition rather than regulation.
But Matthew Sinclair, executive director with the Australia-based firm Carpadium Consulting, tells PaymentsSource that he expects the central bank to continue regulating the market unless it sees clear evidence that there is competitive pressure of fees.
Although Australian banks have been “pushing developments” to prove credit card interchange fees are priced competitively, “I guess it's safe to say that not enough has happened for the reserve bank to reduce its regulatory regime,” Sinclair says.
Sinclair says the central bank’s data show that debit cards are beginning to outnumber credit cards in Australia.
“This confirms my earlier suspicions that people would begin to move away from credit towards debit,” after interchange fees were regulated, Sinclair says.
RBA data had shown that while the number of credit cards on issue grew year-on-year by 1.4%, to 14.4 million in December 2009 from 14.2 million in December 2008, the number of debit cards in circulation grew by 9.3%, to 31.6 million from 28.9 million over the same period.
Since the bank regulated interchange rates, most banks and card companies have withdrawn rules preventing merchants from recouping credit card fees from customers.
The central bank also forced banks and card companies last year (
