A Variation to the Surcharging Standards:
Final Reforms and Regulation Impact Statement – June 2012 Attachment 3 Guidance Note

The Reserve Bank of Australia is providing this Guidance Note to assist the relevant schemes and any participant in the relevant schemes to implement and comply with:

• the Standards titled Standard No. 2, Merchant Pricing for Credit Card Purchases. These Standards apply to the MasterCard and Visa credit card systems; and
• the Standard titled The ‘Honour All Cards’ Rule in the Visa Debit and Visa Credit Card Systems and the ‘No Surcharge’ Rule in the Visa Debit System.

These surcharging standards are collectively referred to as ‘Standards’ in this Guidance Note. These Standards come into force, as varied, on 1 January 2013.

This Guidance Note is intended to provide practical assistance to the MasterCard and Visa credit card schemes, and the Visa Debit scheme (as designated under the Payment Systems (Regulation) Act 1998), as well as the participants of those schemes. The Guidance Note does not vary the Standards. The Bank may update or vary the Guidance Note from time to time as necessary. Any updates or variations will be advised through a media release issued on the Bank's website.

Reasonable Costs of Card Acceptance

The purpose of paragraphs 9 and 10 of the Standards is to ensure that merchants are not prevented from using surcharges to fully recover their costs of card acceptance.

Accordingly, for each of the designated schemes mentioned above, the Standards prevent the scheme rules (or any participant in the scheme) from prohibiting merchants from recovering ‘part or all of the reasonable cost of acceptance’ of the scheme's cards through surcharges to the cardholder. The Standards state that for this purpose, the reasonable cost of acceptance includes, but is not necessarily limited to, the merchant service fee. However, the Standards do not specify the types of any additional costs that may be considered as part of the reasonable cost of acceptance and these costs may vary significantly across merchants and industries, including based on whether merchants own their own payments processing equipment.

These additional costs, which in addition to the merchant service fees might form part of the reasonable cost of acceptance, may include, but are not necessarily limited to:

1. Other costs payable to acquirers. These may include fees for the rental and maintenance of payment card terminals, scheme fees incurred in processing card payments and levied by the acquirer (e.g. international service assessments or cross-border transaction fees), and other fixed fees for providing payment acquiring equipment and services (e.g. access fees, minimum transaction fees and other monthly or annual fees).
2. Costs payable to other payment service providers. These may include gateway fees, switching fees and fees for the provision of equipment and/or services required to accept card payments.
3. Merchants' own costs related to card acceptance. These may include the cost of purchasing and maintaining their own card acceptance infrastructure, scheme fees levied on the merchant by the scheme, and line rental and communications charges related to the use of payment card terminals.
4. Any other costs that are incurred only for the acceptance of cards of the relevant schemes and not other payment methods.

The examples of costs outlined above (including the merchant service fee) should be calculated net of any rebates from either the acquirer or the issuer. Any costs applying to multiple payment methods should be apportioned, as far as possible, pro-rata based on the transaction volumes attributable to each payment method (e.g. the cost of card terminals should be apportioned between the card schemes that use those terminals) and to the extent the apportioned costs have not already been included in the cost of acceptance for another payment method.

Disclaimer

The information contained in this Guidance Note is only intended to provide a general overview in relation to certain matters concerning the Standards. It is not intended to be exhaustive.

The information does not constitute, nor should it be treated as, legal advice. It is the Reserve Bank of Australia's recommendation that independent professional advice be sought. The information contained herein is current as at the date of the Guidance Note and is based on the Standards and the designation of the schemes as at the applicable issue dates.