9
Payments Regulation in Asia
Interchange Caps
DEFINITION
Interchange fees, the fee set by global card networks, paid by the merchants, and received by the issuing bank, is typically the largest portion of the MDR. To prevent rising interchange fees, central banks around the world have set caps on the price of interchange. These caps range from per item, to percent, to weighted-average limits.
COUNTRY IMPLEMENTATION
Across the countries surveyed, only Australia currently has interchange caps across credit and debit transactions. The table below presents current and former interchange caps by region:
Effective Date(s) of Current Cap
Country
Credit
Debit
Exceptions
AUD 0.08 (~$0.05) weighted avg. ($0.10 or 0.2% for individual txns) 7
Three Party Card Networks, International Cards
0.5% weighted avg (0.8% for individual txns) 6
2017, 2021 (updated debit)
Australia
Singapore
No Debit or Credit Interchange Cap in Singapore
0.9% (POS/online), 0.8% (QR code) 8 ; for SMBs 0.4% (POS/ online), 0.3% (QR code)
Credit Cards, International Cards
India
2018
-
Japan
2019 (discontinued)
3.25%
-
Debit Cards
Table 1. Interchange Caps (Current and Discontinued) by Country
IMPACT ANALYSIS
Immediately following the enforcement of the 2003 interchange caps and surcharging protections in Australia, 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 1). 9
6 https://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/conclusions-pa- per-may2016/interchange-fees-and-transparency-of-card-payments.html 7 The RBA also established a sub-benchmark for the weighted average interchange cap of single-network debit cards (SNDCs) at AUD 0.08 to remove incentives for issuing these kinds of cards. https://www.rba.gov.au/payments-and-infrastructure/ review-of-retail-payments-regulation/conclusions-paper-202110/pdf/review-of-retail-payments-regulation-conclusions-pa- per-202110.pdf 8 Small merchants have an annual turnover below Rs 20 lakh (~$24k) https://www.medianama.com/2017/12/223-rbi- mdr/ 9 https://www.rba.gov.au/payments-and-infrastructure/resources/payments-data.html
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