Payment Systems (Regulation) Act 1998
Standard No. 2 of 2016
The Setting of Interchange Fees in the Designated debit and prepaid Card Schemes and Net Payments to Issuers
Pursuant to Section 18 of the Payment Systems (Regulation) Act 1998, the Reserve Bank of Australia determines Standard No. 2 of 2016 The Setting of Interchange Fees in the Designated Debit and Prepaid Card Schemes and Net Payments to Issuers.
Signed
Glenn Stevens
Governor
Reserve Bank of Australia
Date: 26 May 2016
standard no. 2 OF 2016
The Setting of Interchange Fees in the Designated Debit and Prepaid Card Schemes and Net Payments to Issuers
1. Objective
The objective of this Standard is to ensure that the setting of interchange fees and payments and other transfers of valuable consideration having an equivalent object or effect to interchange fees in each designated debit card scheme and prepaid card scheme is transparent and promotes:
· efficiency; and
· competition
in the Australian payments system.
2. Application
2.1 This Standard is determined under Section 18 of the Payment Systems (Regulation) Act 1998 (the Act).
2.2 This Standard applies to each of the following, each of which is referred to in this Standard as a Scheme:
(a) the payment system operated within Australia known as Visa Debit, which was designated under the Act as a payment system on 23 February 2004 and which is referred to in this Standard as Visa Debit;
(b) the payment system operated within Australia known as Visa Prepaid, which was designated under the Act as a payment system on 15 October 2015 and which is referred to in this Standard as Visa Prepaid;
(c) the payment system operated within Australia known as Debit MasterCard, which was designated under the Act as a payment system on 15 October 2015 and which is referred to in this Standard as Debit MasterCard;
(d) the payment system operated within Australia known as MasterCard Prepaid, which was designated under the Act as a payment system on 15 October 2015 and which is referred to in this Standard as MasterCard Prepaid;
(e) the debit card payment system operated within Australia known as the EFTPOS payment system, which was designated under the Act as a payment system on 12 June 2012 and which is referred to in this standard as the EFTPOS System; and
(f) the prepaid card payment system operated within Australia under the EFTPOS Scheme Rules, which was designated under the Act as a payment system on 15 October 2015 and which is referred to in this standard as EFTPOS Prepaid.
2.3 In this Standard:
Above Benchmark Reference Period has the meaning given to it in clause 4.2;
Acquired includes accepted;
Acquirer means a participant in a Scheme in Australia that:
(a) provides services, directly or indirectly, to a Merchant to allow that Merchant to accept a Card of that Scheme; or
(b) is a Merchant that accepts, or is a Related Body Corporate of a Merchant that accepts, a Card of that Scheme and bears risk as principal in relation to the payment obligations of the Issuer of that Card in relation to that acceptance;
Benefit means a payment, receipt, rebate, refund, allowance, discount or deduction or a benefit (however named or described) of a similar nature to any of them;
Card Account means in relation to a Card of a Scheme the account that is debited when that Device is used to purchase goods or services;
Card of a Scheme or Card of that Scheme means a Debit Card of a Scheme or a Prepaid Card of a Scheme;
Card of a Scheme Pair means a Card of a Scheme that is part of a Scheme Pair;
Card Transaction means a Debit Card Transaction or a Prepaid Card Transaction;
Commencement Date means 1 July 2017;
Debit Card of a Scheme or Debit Card of that Scheme means, in relation to a Scheme, a Device issued by a participant in the Scheme in Australia under the Rules of the Scheme that can be used to make payments for goods or services by accessing a deposit account held at an authorised deposit-taking institution or a bank or other financial institution;
Debit Card Transaction means, in relation to a Scheme, a transaction in that Scheme between a holder of a Debit Card of that Scheme and a Merchant involving the purchase of goods or services (whether or not it also involves the obtaining of cash) using a Debit Card of that Scheme that is Acquired by an Acquirer (but does not include any transaction to reverse such a transaction or provide a credit or make a chargeback in relation to such a transaction);
Device means any card, plate or other payment code or device, including a code or device where no physical card or other embodiment is issued and a code or device used or to be used for only one transaction;
EFTPOS Scheme Rules are the rules promulgated under the constitution of EFTPOS Payments Australia Limited (ABN 37 136 180 366) and any schedule, document, specification or rule published by EFTPOS Payments Australia Limited pursuant to those rules;
Interchange Fee Category has the meaning given to it in clause 4.1(b);
Interchange Fees means in relation to a Scheme, wholesale fees, known as interchange fees, which are payable between an Issuer and an Acquirer, directly or indirectly, in relation to Card Transactions in the Scheme but excluding any such fees to the extent that they are referable only to the obtaining of cash by the Card holder;
Issuer means a participant in a Scheme in Australia that issues Debit Cards or Prepaid Cards of a Scheme (as the case may be) to its customers;
Issuer Payments has the meaning given to it in clause 5.2;
Issuer Receipts has the meaning given to it in clause 5.2;
Merchant means, in relation to a Scheme, a merchant in Australia that accepts a Card of that Scheme for payment for goods or services;
Multilateral Interchange Fee means, in relation to a Scheme, an Interchange Fee that is determined by an administrator of the Scheme and applies regardless of the identity of the Acquirer or Issuer paying or receiving the Interchange Fee;
Net Compensation has the meaning given to it in clause 5.1;
Prepaid Card of a Scheme or Prepaid Card of that Scheme means, in relation to a Scheme, a Device issued by a participant in the Scheme in Australia under the Rules of the Scheme that can be used to make payments for goods or services using a store of value that has been prepaid or pre-funded and is accessible to make payments for goods or services only through the use of that, or a linked or related, Device;
Prepaid Card Transaction means, in relation to a Scheme, a transaction in that Scheme between a holder of a Prepaid Card of that Scheme and a Merchant involving the purchase of goods or services (whether or not it also involves the obtaining of cash) using a Prepaid Card of that Scheme that is Acquired by an Acquirer (but does not include any transaction to reverse such a transaction or provide a credit or make a chargeback in relation to such a transaction);
Quarter means a 3 month period ending on 30 June, 30 September, 31 December or 31 March;
Reference Period means a 12 month period ending on the last day of a Quarter;
Registration Date means the date on which this Standard is registered in the Federal Register of Legislation;
Related Body Corporate has the meaning given in the Corporations Act 2001;
Relevant Portion has the meaning given to it in clause 5.2;
Reporting Period means, subject to clause 7.3, a 12 month period ending 30 June;
Rules of a Scheme or Rules of the Scheme means the constitution, rules, by-laws, procedures and instruments of the relevant Scheme as applied in Australia, and any other arrangement relating to the Scheme by which participants in that Scheme in Australia are, or consider themselves to be, bound;
Scheme Benchmark is 8.0 cents;
Scheme Pair means:
(a) VISA Debit and VISA Prepaid;
(b) Debit MasterCard and MasterCard Prepaid; or
(c) EFTPOS System and EFTPOS Prepaid;
Scheme Pair Transaction has the meaning given in clause 5.1;
include or including or such as when introducing an example do not limit the meaning of the words to which the example relates to that example or examples of a similar kind; and
terms defined in the Act have the same meaning in this Standard.
2.4 For the purposes of this Standard:
(a) a provision of a plan, arrangement or agreement shall be deemed to have a particular purpose if the provision was included in the plan, arrangement or agreement by a party or parties for purposes that include that purpose and that purpose was a substantial purpose; and
(b) conduct including the payment or receipt of a fee or other valuable consideration shall be deemed to have been made for a particular purpose if the person undertaking the conduct, payment or receipt did so for purposes that include that purpose and that purpose was a substantial purpose.
2.5 For the purposes of this Standard, an Interchange Fee paid from an Acquirer to an Issuer is to be expressed as a positive number and an Interchange Fee paid from an Issuer to an Acquirer is to be expressed as a negative number.
2.6 Each participant in a Scheme must do all things necessary on its part to ensure compliance with this Standard.
2.7 If any part of this Standard is invalid, this Standard is ineffective only to the extent of such part without invalidating the remaining parts of this Standard.
2.8 This Standard is to be interpreted:
(a) in accordance with its objective; and
(b) by looking beyond form to substance.
2.9 On the Commencement Date this Standard replaces each of the following Standards:
(a) The Setting of Interchange Fees in the Visa Debit Payment System; and
(b) Interchange Fees in the EFTPOS System.
Neither the registration nor the terms of this Standard affect those standards before the Commencement Date.
3. Anti-Avoidance
A participant in a Scheme must not, either alone or together with one or more other persons, enter into, begin to carry out or carry out a plan or arrangement or otherwise be knowingly involved in a plan or arrangement if it would be concluded that the person did so for a purpose of avoiding the application of this Standard, and the plan or arrangement or part of the plan or arrangement has achieved or would but for this provision have achieved or could reasonably be considered to have achieved that purpose.
4. Interchange Fees
4.1 (a) An Interchange Fee (exclusive of goods and services tax) in relation to a Card Transaction must:
(i) where the Interchange Fee is a fixed amount per transaction, not exceed 15.0 cents; or
(ii) where the Interchange Fee is calculated by reference to the value or amount of the transaction, not exceed 0.200 per cent of that amount or value.
(b) If an Interchange Fee applies in relation to a category of Card Transactions (whether that category is determined by reference to the nature of the holder, or type of the Card of the Scheme, the identity or nature of the Merchant, the means of effecting the transaction, the security or authentication that applies or any other matter, or is a residual category covering transactions not in any other category) (Interchange Fee Category), that Interchange Fee must be:
(i) a percentage of the value of the Card Transaction to which it relates; or
(ii) a fixed amount,
applying to all Card Transactions in the category, and cannot be expressed as a range of rates or amounts.
(a) the total value of Interchange Fees (exclusive of goods and services tax) payable in relation to Card Transactions undertaken in a Scheme during a Reference Period divided by the number of those Card Transactions exceeds the Scheme Benchmark; and
(b) for the Scheme Pair of which the Scheme referred to in sub-paragraph (a) forms part, the total value of Interchange Fees (exclusive of goods and services tax) payable in relation to Card Transactions undertaken in each of the Schemes in the Scheme Pair during the Reference Period divided by the number of those Card Transactions exceeds the Scheme Benchmark;
that Reference Period will be an Above Benchmark Reference Period for that Scheme and the participants in the Scheme referred to in paragraph (a) above must take all necessary steps to vary the rates or amounts of Interchange Fees applicable under that Scheme, with effect no later than 60 days after the end of the Above Benchmark Reference Period, to rates or amounts such that, had those varied rates or amounts applied under the Scheme during the Above Benchmark Reference Period, that Reference Period would not have been an Above Benchmark Reference Period for that Scheme unless:
(c) prior to the end of that 60 day period, a variation to the rates or amounts of Interchange Fees applicable under the other Scheme in the Scheme Pair takes effect; and
(d) the varied Interchange Fees referred to in paragraph (c) are such that, had they applied under that other Scheme during the Above Benchmark Reference Period, the Reference Period would not have been an Above Benchmark Reference Period.
(a) subject to paragraphs (c), (d) and (e), Issuer Receipts of the Issuer for a Scheme Pair is the total of the Benefits received, directly or indirectly, by the Issuer in relation to any of the Cards of the Schemes in the Scheme Pair or Scheme Pair Transactions that have a purpose, or likely effect of promoting or incentivising the issuance or use of Cards of any Scheme in the Scheme Pair or of providing or funding incentives to holders to use Cards of the Scheme or Scheme Pair, but excluding:
(i) Interchange Fees;
(ii) payments made by or on behalf of holders of Cards of the Scheme (or holders of the related Card Accounts) to:
(A) discharge a liability (whether then due and payable or not) to the Issuer that arose as a result of such a Device being held or used; or
(B) create a credit balance in the relevant Card Account; and
(iii) any transaction to reverse a Card Transaction or provide a credit or make a chargeback in relation to a Card Transaction.
These Benefits include volume based and transaction specific Benefits such as:
(i) marketing incentives;
(ii) Benefits for meeting or exceeding a specific transaction volume, percentage share or dollar amount of transactions processed; and
(iii) signing bonuses;
(b) subject to paragraphs (c), (d) and (e), Issuer Payments of the Issuer for a Scheme Pair is the total amount of all Benefits paid, given or allowed, directly or indirectly, by the Issuer to or in favour of the administrator of a Scheme in the Scheme Pair in Australia or an Acquirer in relation to any of the Cards of the Schemes in the Scheme Pair or Scheme Pair Transactions (excluding Interchange Fees and the amount of the Card Transactions paid by the Issuer to the Acquirer to settle obligations arising from the clearing of Card Transactions). These Benefits include:
(i) Scheme branding fees;
(ii) processing fees; and
(iii) assessment fees;
(c) if a Benefit referred to in paragraph (a) or (b) does not relate solely to Cards of any Scheme in the Scheme Pair or Scheme Pair Transactions and also relates to other Devices or other transactions:
(i) the Benefit must be apportioned between:
(A) the Cards of any Scheme in the Scheme Pair and Scheme Pair Transactions on the one hand; and
(B) the other Devices and other transactions on the other,
fairly and reasonably, having regard to, where relevant, the transaction history on Devices used in the payment systems to which the Benefit relates and the proportion of the Devices to which the Benefit relates that are Cards of a Scheme in the Scheme Pair issued by the Issuer; and
(ii) the portion referable to Cards of any Scheme in the Scheme Pair and Scheme Pair Transactions determined in accordance with sub-paragraph (i) (the Relevant Portion) must be included in the determination of Issuer Receipts or Issuer Payments, as applicable;
(d) one method of apportionment that will be fair and reasonable for the purpose of clause 5.2(c) is an apportionment on a pro-rata basis, based on the value of Scheme Pair Transactions using Cards of any Scheme in the relevant Scheme Pair issued by that Issuer over the Reporting Period as a proportion of the total value of the transactions undertaken in any payment system to which the Benefit relates over the Reporting Period using Devices issued by that Issuer. This does not preclude an apportionment in another way that meets the requirements of clause 5.2(c); and
(e) where a Benefit referred to in paragraph (a), (b) or (c) relates to a period that spans more than one Reporting Period, the Benefit or, in the case of a Benefit referred to in paragraph (c), the Relevant Portion of the Benefit, may be allocated among Reporting Periods on a pro-rata basis based on the number of months in each relevant Reporting Period to which the Benefit relates provided that:
(i) no part of it is allocated to any Reporting Period the whole of which occurs before the term of the contract or arrangement under which the Benefit is payable, receivable or allowable has commenced;
(ii) no part of it is allocated to any Reporting Period the whole of which occurs after the term of the contract or arrangement under which the Benefit is payable, receivable or allowable has ended; and
(iii) it may not be allocated among more than 10 consecutive Reporting Periods.
6. Reporting and Transparency
6.1 An administrator of a Scheme in Australia or a representative of the participants in the Scheme in Australia must publish the Multilateral Interchange Fee rates or amounts (whichever is applicable) of the Scheme in Australia on the Scheme’s website, including the rates or amounts for each Interchange Fee Category.
6.5 An administrator of a Scheme in Australia or a representative of the participants of the Scheme in Australia must, not later than 30 days after the end of each Quarter, certify in writing to the Reserve Bank of Australia each of the following for that Quarter for the Scheme (and in the case of paragraph (e), the relevant Scheme Pair):
(a) the total value of Card Transactions undertaken in the Scheme in that Quarter;
(b) the number of Card Transactions undertaken in the Scheme in that Quarter;
(c) the total value of all Interchange Fees (exclusive of goods and services tax) payable in respect of the Card Transactions undertaken in the Scheme during that Quarter;
(d) the total value of Interchange Fees (exclusive of goods and services tax) payable in respect of Card Transactions undertaken in the Scheme during the Quarter divided by the total number of the Card Transactions undertaken in the Scheme during the Quarter;
(e) the total value of Interchange Fees (exclusive of goods and services tax) payable in respect of Scheme Pair Transactions undertaken in the Schemes that form part of that Scheme Pair during the Quarter divided by the total number of the Scheme Pair Transactions undertaken in the Schemes that form part of that Scheme Pair during the Quarter; and
(f) each Interchange Fee Category that applied for some or all of the Quarter and, for each of those categories:
(i) the Interchange Fee rates or amounts (whichever is applicable) that applied during the Quarter (expressed as a percentage or an amount, not as a range); and
(ii) the total value of Interchange Fees (exclusive of goods and services tax) payable in respect of that Quarter that are referrable to Card Transactions undertaken in the Scheme in that Quarter in that category.
7.2 Determination of whether there is an Above Benchmark Reference Period must be made Quarterly in accordance with clause 4.2 from the Commencement Date irrespective of whether the relevant Reference Period commenced before or after the Commencement Date. This means that the first determination under clause 4.2 must be made after the Commencement Date in relation to the Reference Period ending 30 June 2017, even though that Reference Period commenced before the Commencement Date.
(a) clause 5; and
(b) clause 6.4 and clause 7.4 as it relates to clause 6.4:
the:
(c) first Reporting Period will be the period from the Registration Date to 30 June 2018; and
(d) Net Compensation in relation to an Issuer and a Scheme Pair is to be calculated for that first Reporting Period using only the Issuer Receipts of the Issuer and the Issuer Payments of the Issuer over that first Reporting Period that directly or indirectly relate to issue or use of Cards of the Schemes in the Scheme Pair, or Scheme Pair Transactions, on or after the Commencement Date.