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The Reserve Bank of Australia said Friday it would lift restrictions on payment card interchange if the country's card industry takes steps the central bank believes will improve competition and give merchants more power over card acceptance. The promise comes from a report released Friday by the central bank that details ongoing attempts to reform the country's payment system. In 2003, the bank began a process that led to interchange caps for debit and credit cards. The cap stands at 0.5% of the sale, down from the previous 0.95%. The central bank says its reforms have "significantly improved" competition in Australia's payment system, but card issuers and card networks disagree. They contend the clampdown on interchange has stifled industry profits and innovation. By August 2009, the Reserve Bank wants the country's card industry to demonstrate a commitment to keep interchange rates low and to offer a guarantee the rates would not rise again. If the card industry meets certain recommended conditions from the central bank to improve competition among payment systems, the bank promises to lift the interchange restrictions. The Reserve Bank made its proposals after weighing input from merchants, card issuers and payment-industry groups. The bank also suggests that card issuers develop an alternative debit-payment scheme, publicize interchange rates on all types of cards and allow merchants to refuse to accept cards with high interchange rates. The Reserve Bank says it will monitor the card industry's progress in developing a competitive approach to setting interchange rates on its own and will make a final ruling next August. If "insufficient progress" is observed, the central bank says it might reduce interchange caps to 0.3%. "If the (card) industry can address our concern that interchange rates will remain fair and competitive–and they will not rise again–we are willing to remove interchange-rate restrictions," Michele Bullock, the Reserve Bank's head of payments policy, tells CardLine Global. "But if we lift the regulations, we are going to want to see merchants given as much power as possible."
