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Payments Regulation in Asia
Interchange and Network Fee Pricing Transparency
DEFINITION
Regulators may mandate that networks publish interchange or network fee pricing as these are typically multi-laterally set fees that impact both card issuers and card-accepting merchants.
COUNTRY IMPLEMENTATION
Of the four countries in scope, both Australia and Japan have mandated card networks to publish interchange fees. Clause 6.1 of the RBA’s Standards No. 1 and No. 2 of 2016 required card schemes in Australia to publish “Multilateral Interchange Fee rates or amounts.” Pursuant to these clauses, global card schemes Visa 13 and Mastercard 14 publish interchange rates for domestic transactions made on credit, debit, and prepaid cards. In addition, in September 2022, Japan’s Ministry of Economy, Trade, and Industry (METI), responsible for enhancing economic and industrial aims of the Japanese government, required the card networks to disclose interchange fees “in order to ensure fair competitive conditions among international brands in the credit card issuance market and raise the transparency of the credit card market as a whole.” 15
IMPACT ANALYSIS
The availability of country-level payments statistics varies significantly by country. In some countries, central banks will publish payments statistics through financial institution data collections or surveys. Where available, this data can be used by merchants to benchmark their own rates or to gauge their performance against a market average. In addition, while isolating the effects of price transparency from other determinants of price is empirically difficult, some examples of transparency in financial markets suggest transparency lowered prices. From a review of empirical research on price transparency, “most research suggests that when better price information is available prices for goods sold to consumers fall.” 16 Markets in intermediate goods, however, is more complicated, with price transparency on the one hand providing buyers and sellers important information about the true economic value of goods or services, on the other hand, “public prices may make collusion among sellers easier.” 17 KEY TAKEAWAYS • Limited Regulation of Mandated Transparency: Of the four countries analyzed, only Australia and Japan have mandated interchange fee disclosures for Visa and Mastercard. • Pricing Transparency May Contribute to Market Efficiencies and Lower Costs: Studies show that pricing transparency may contribute to lower prices for consumers. However, in intermediary markets such as payments, empirical studies show mixed results on the efficacy of pricing transparency to reduce costs.
13
https://www.visa.com.au/about-visa/interchange.html
14
https://www.mastercard.com.au/en-au/business/overview/support/interchange.html
15
https://www.meti.go.jp/english/press/2022/0914_002.html
16 https://crsreports.congress.gov/product/pdf/RL/RL34101#:~:text=Despite%20these%20complications%2C%20great- er%20price,efficient%20outcomes%20and%20lower%20prices. 17 Ibid
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