34
Payments Regulation in Asia
The reporting is some of the most granular around the globe, as no other jurisdictions publish average card fees at this level of detail, but there are still benchmarks absent from the RBA’s reporting. For example, the RBA does not split out interchange and network fees from their merchant service charge reporting and only provides blended credit market share volumes for Visa and Mastercard.
Visa and Mastercard Interchange Rates
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 63 and Mastercard 64 publish interchange rates for domestic transactions made on credit, debit, and prepaid cards. Following the RBA’s 2019-2021 review, the weighted-average debit interchange caps supplemented by the introduction of a ‘sub-benchmark’ for single-network debit cards, which only allow for payments to be processed through one debit network, such that the weighted- average interchange fee on these cards for a given scheme must not exceed 8 cents. As a result, Visa and Mastercard’s published interchange rates for debit are split by single- and dual-network card types as the RBA interchange caps were revised in 2021 to incentivize issuance of dual-network debit cards, promoting greater merchant access to debit routing.
ANALYSIS OF PUBLICLY AVAILABLE CARD FEES
Immediately following the enforcement of the 2003 interchange caps and surcharging, there was a sharp decline in Mastercard and Visa average cost of acceptance for Australian merchants. Between Q1 2003 and Q1 2004, the average Visa and Mastercard cost of acceptance fell from 1.45% to 1.08% (Figure 9). 65 The interventions from 2003 limited merchants exposure to rising costs through a price cap and allowed merchants to apply persistent and consistent pressure on the card networks through the use of a surcharge. 66 While American Express was exempt from credit card interchange caps as their fees are set bilaterally and unilaterally,, unlike Visa and Mastercard which set interchange rates for cards issued by their banking partners, American Express fees have steadily fallen from their high of 2.51% in Q1 2003 to 1.32% in Q4 2023. 67 In contrast, while Visa and Mastercard blended MSC experienced consistent declines from Q1 2003 to Q2 2020, when credit and debit rates were split in 2020, a different trend emerged.
63
https://www.visa.com.au/about-visa/interchange.html
64
https://www.mastercard.com.au/en-au/business/overview/support/interchange.html
65
https://www.rba.gov.au/payments-and-infrastructure/resources/payments-data.html
66
https://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/q-and-a/
card-payments-regulation-qa-conclusions-paper.html#surcharging-general-q1 67
https://www.rba.gov.au/payments-and-infrastructure/resources/payments-data.html
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