Exclusion of Scheme Debit Transactions from Table C2 Explanatory Note

In 2005 the Reserve Bank of Australia commenced publishing Market Shares of Credit and Charge Card Schemes - Table C2. But while the Table was intended to provide information on the credit and charge card markets, data available to the Bank prior to March 2008 did not allow for scheme debit transactions to be excluded. This is despite the fact that, as a debit product, scheme debit transactions were not subject to the credit card scheme reforms. In 2008 the Retail Payments Statistics collection was revised to explicitly identify scheme debit transactions. These changes have enabled the publication of scheme debit data in Debit Card Statistics - Table C5 and now the removal of scheme debit data in the calculation of credit and charge card market shares in Table C2.

This note summarises how the market share data are calculated, reviews trends in card payments influencing market shares, and examines the impact of the changes on the published data.

Calculation of Market Shares

Market share data are calculated using acquiring data from the monthly Retail Payments Statistics (RPS) data collection. Acquiring returns are used in preference to issuing returns so that purchases on co-branded cards can be correctly counted towards the market share of the three-party schemes (American Express and Diners Club). The calculation covers all domestic acquiring transactions, by both Australian and overseas cardholders, including transactions on both personal and commercial cards.

Prior to March 2008 the RPS collection did not capture scheme debit transactions separately from credit card transactions, so these transactions were included in the market share calculation by default. Scheme debit transactions draw funds from a deposit account held at a financial institution, but are processed through the same networks used by MasterCard and Visa for credit and charge card transactions, rather than through the EFTPOS system.

In March 2008, the RPS collection was expanded to separately identify transactions on scheme debit cards. Published data were not amended immediately to reflect the change because the Bank needed time to ensure that the information being reported was of sufficient quality. The Bank was able to begin publication of stand-alone data on the value and volume of scheme debit transactions in Table C5 in April 2009. From May 2010, it will begin publishing market share data with scheme debit transactions removed. Existing data will be revised back to March 2008. Attachment A provides a comparison of the market share data, with and without the scheme debit data, from March 2008 to March 2010.

Trends in Card Payments

The impact of changes to remove scheme debit transactions from the market share calculation reflects broader trends in the growth of debit and credit card payments. These trends have diverged over recent years, with debit card payments – particularly scheme debit – continuing to grow strongly, while the use of credit cards has moderated (Graph 1). Over the year to the March 2010 quarter, the number of scheme debit purchases increased by 33 per cent, compared with a 10 per cent increase in the number of EFTPOS transactions and a 7 per cent increase in credit and charge card transactions. However, scheme debit transactions remain a relatively small proportion of total card transactions; in the March quarter of 2010 the number of scheme debit transactions represented around 18 per cent of debit card transactions and 10 per cent of all card transactions.

These trends have resulted in scheme debit making a small but steadily increasing contribution to the market shares of the four-party card schemes (Graph 2). Over the two years that scheme debit data have been collected, this contribution has increased by around 1 percentage point, to be 2.8 per cent of the number of transactions and 2.3 per cent of the value of transactions in March 2010. The greater impact on the number of transactions is consistent with the fact that scheme debit transactions have a smaller average value than credit and charge card transactions – $90 for scheme debit transactions in 2009, compared with around $145 for credit and charge cards.

Impact of Removing Scheme Debit Transactions

Reflecting the trends discussed above, removing scheme debit from the market share data has two effects – a level effect and a trend effect.

The inclusion of scheme debit transactions in these series has tended to overstate the level of market share of the four-party schemes (Graphs 3 and 4). Removal of the scheme debit data results in a series break of 1.8 percentage points by number and 1.5 percentage points by value in March 2008.

The inclusion of scheme debit has also slightly overstated the trend growth in four-party market shares. With scheme debit transactions included, MasterCard and Visa's share of both the number and value of transactions was broadly unchanged in the year to March 2010, compared with the previous year. Once scheme debit transactions are excluded, the four-party schemes’ share of both the number and value of transactions declined by 0.4 percentage points over the same period.

Attachment A

The following table summarises the changes to Table C2. The first four columns report the data as originally published on 12 April 2010, while the last four columns report the revised data as published on 12 May 2010.