Document ID: chunk:federal_register_of_legislation:F2019N00027:body:0:p1
Version: federal_register_of_legislation:F2019N00027
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Payment Systems (Regulation) Act 1998
Notice of Proposed Variation of Standards Relating to the Setting of Interchange Fees
Notifiable Instrument
This notice is published in accordance with the requirements set out in section 28(2)(a) of the Payment Systems (Regulation) Act 1998.
The Reserve Bank of Australia ('the Bank') proposes to vary the following Standards so that they read as set out in Appendix A to the consultation paper attached to this notice:
       * Standard No. 1 of 2016: The Setting of Interchange Fees in the Designated Credit Card Schemes and Net Payments to Issuers; and
      * Standard No. 2 of 2016: The Setting of Interchange Fees in the Designated Debit and Prepaid Card Schemes and Net Payments to Issuers.
Purpose and Effect
The purpose of the Bank's proposed variation of the Standards is to improve efficiency and promote competition in the Australian payments system by improving the operation of Standards No. 1 and No. 2 of 2016. Specifically, the proposed variations seek to improve the clarity and minimise the compliance burden of the 'net compensation' requirement, without changing the purpose or substantive effect of the Standards.
The Standards cap the weighted average of interchange fees that can be paid in each scheme or scheme pair. The Standards also contain requirements relating to the payment of net compensation to issuers. The net compensation provisions are designed to prevent the caps on interchange fees in the Standards being circumvented by arrangements involving non-interchange payments or other incentives being provided by schemes to issuers.
The proposed variations relate to the net compensation provisions and include provisions that will have the following effect:
       * clarify the definition of Issuer Receipts, including by clarifying treatment of discounts and non-financial benefits, the types of entities that can provide Issuer Receipts, and the 'incentive test';
       * clarify the definition of Issuer Payments, including by clarifying the types of payments intended to be captured as Issuer Payments and the types of entities that can receive an Issuer Payment;
       * reduce the compliance burden by (i) requiring net compensation to be calculated on an accruals basis such that certifying entities have more scope to draw on information from financial accounts, and (ii) providing that the obligation to comply with the net compensation requirements falls on the entity that has the status within a scheme to issue cards itself and/or sponsor another entity into the scheme, rather than falling on sponsored entities.
The Bank published a consultation paper in relation to its proposed action on 28 February 2019. The consultation paper, a copy of which is attached, sets out the proposed variations, the rationale for the proposals, some feedback from informal consultation with stakeholders, and invited submissions in response to