A Variation to the Surcharging Standards:
Final Reforms and Regulation Impact Statement – June 2012 3. Objectives

The Payments System Board's Mandate and Objectives

The Payments System Board's responsibilities stem from the Financial System Inquiry, whose findings and recommendations were released in 1997.^[18] The Inquiry found that, while earlier deregulation had improved competition and efficiency in Australia's payments system, further gains were possible. To that end, it recommended the establishment of the Payments System Board at the Reserve Bank with the responsibility and powers to promote greater competition, efficiency and stability in the payments system. The government accepted those recommendations and established the Payments System Board in 1998. The Board's responsibilities are set out in the Reserve Bank Act 1959. The Act requires the Board to determine the Bank's payments system policy so as to best contribute to: controlling risk in the financial system; promoting the efficiency of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of the financial system.

At the time the Board was established, the government also provided the Bank with specific powers to regulate payment systems in order to implement the Board's policies. The most relevant powers in the context of the card payment reforms are those set out in the Payment Systems (Regulation) Act. Under this Act, the Bank has the power to designate payment systems and to set standards and access regimes in designated systems. The Act also sets out the matters that the Bank must take into account when using these powers, including the desirability of payment systems: being financially safe for use by participants, efficient and competitive; and not materially causing or contributing to increased risk to the financial system.

Objectives for the Surcharging Standards and Variations

In line with its specific powers, the Bank has three specific objectives for its surcharging Standards. First, the Standards aim to improve the efficiency of the payments system by providing better price signals to cardholders about the relative costs of different payment methods. Second, the ability to surcharge provides a negotiating tool for merchants, which may help place downward pressure on merchant service fees. Third, removing restrictions on merchant surcharging also reduces the subsidisation of credit card users by customers choosing less costly payment methods; instead of building the cost of card acceptance into the overall price of their goods and services, merchants can charge the customer if they choose to use a high-cost payment method. Any variations to be put in place would be intended to help ensure that the Standards continue to meet these objectives in light of the recent developments in surcharging practices that have been outlined above.

Footnote

Financial System Inquiry (Wallis Committee) (1997), Financial System Inquiry Final Report, Australian Government Publishing Service, Canberra. [18]