malcolm edey : the card payments review speech by mr malcolm edey, assistant governor ( financial system ) of the reserve bank of australia, at the cards & payments australia conference, melbourne, 12 may 2016. * * * thank you once again for the opportunity to address this event. in some ways this is an awkward time to be giving a speech on card payments. as you know, the reserve bank payments system board has been conducting a comprehensive review of its regulation in this area. that review is now nearing completion. it is expected to be finalised at the board ’ s next meeting, which will take place next week. obviously i can ’ t pre - empt any decisions that might come out of that meeting. instead what i would like to do is offer a kind of curtain - raiser, by summarising the history of the review and the way it has unfolded to date. i plan to do that under three headings : the background, the issues and the process. the background let me begin with some brief background. the current arrangements for payments system regulation date back to the wallis reforms that were enacted in 1998. those reforms : • established a separate payments system board of the reserve bank with a majority of independent directors, • gave the board the power to designate payment systems, and to set regulatory standards for designated systems in relation to such matters as access and pricing, • set the policy objectives of the board as efficiency, competition and stability. the wallis report recommended an initial focus on credit cards, and accordingly this was the first area of regulatory action taken by the new board. the four - party credit card schemes were designated in 2001 and, after a period of consultation, a package of reforms was implemented from 2003 onwards. the key elements of that package are well known and are still in place. they included : • a weighted average cap on interchange fees of 50 basis points • an access regime for credit card schemes, and • removal of no - surcharge rules imposed by the schemes. subsequently a package of reforms for debit cards was introduced in 2006. the thinking behind these regulatory measures was heavily focused on the efficiency of price signals to consumers. interchange fees and surcharging rules were at the heart of this, and it is not surprising that they remain central to the current review. the board ’ s early work recognised that interchange fees play an important role in influencing the incentives to use particular payment instruments. in commercial terms, interchange fees serve the purpose of rebala

tail that wags the economy : beliefs and persistent stagnation ”, nber working paper no. 21719. the authors argue that if people base their beliefs on past realisations, then extreme, albeit transitory, events can generate persistent changes in our cognitive framework. 9 see e. g. gerba, e. and d. zochowski ( 2017 ), “ knightian uncertainty and credit cycles ”, ecb working paper no 2068. 10 see e. g. benigno, g. and l. fornaro ( 2017 ), “ stagnation traps ”, ecb working paper no 2038. 11 see rossi, b., t. sekhposyany and m. souprez ( 2017 ), “ understanding the sources of macroeconomic 6 / 7 bis central bankers'speeches uncertainty ”, barcelona gse working paper no 920. 12 see e. g. ecb ( 2017 ), financial stability review, may and november. 13 see e. g. draghi, m. ( 2017 ), “ accompanying the economic recovery ”, speech at the ecb forum on central banking, sintra, 27 june. 7 / 7 bis central bankers'speeches