Reserve Bank of Australia set to conduct “holistic review” of retail payments regulation
The Reserve Bank of Australia (RBA) is to commence a review of the country’s retail payments regulation with a focus on “encouraging the payments industry to address efficiency, competition and safety issues itself”.
RBA to review retail payments regulation
The review was announced by Ellis Connolly, head of payments policy at RBA, during his speech at the Merchant Risk Council Conference in Melbourne this week.
Connolly confirmed that the review would take place once the Australian government completes its evaluation of the current Payment Systems Regulation Act 1998 (PSRA), which also outlines the scope of the RBA’s regulatory powers.
This initial hurdle will seek to update the definitions of a payment system and participant “so that newer players can also be regulated if necessary”, as well as assess “some systems and participants that are increasingly prominent in online retail payments”, such as payment gateways, payment facilitators, digital wallet providers and buy now, pay later (BNPL) services.
Payments under the microscope
The completion of this remit will be followed by “a holistic review of retail payments regulation” conducted by the RBA, Connolly confirms, with a specific focus on the transparency and cost of payment services for consumers and merchants, surcharging frameworks, mobile wallets and cross-border payments.
He explains that the central bank will, in part, attempt to meet this focus by reforming various policy issues relating the card payments.
These include: the cost of card payments for end users (including scheme fees and international card transaction costs); how the least-cost routing of online debit card transactions can be achieved to the benefit of lower merchant costs; the promotion of competitive payment services among e-commerce platforms; and the introduction of tokenisation standards for online card payments.
For BNPL, Connolly also revealed the RBA’s plans to readdress certain no-surcharge rules for service operators, which would in effect enable retailers to pass operational costs on to BNPL consumers.
“In 2021, the RBA concluded that merchants should be allowed to surcharge BNPL services,” he said. “The RBA’s view at the time was that any benefits of no-surcharge rules in terms of supporting new entry into the payments market was outweighed by the costs in terms of efficiency and competition in the payments system.
“However, it was not clear that the RBA had the power to require the removal of these no-surcharge rules. After the reforms to the PSRA, the RBA plans to revisit this issue as part of a broader review of whether the RBA’s surcharging framework remains fit for purpose.”
