Document ID: chunk:federal_register_of_legislation:F2019N00027:body:0:p7
Version: federal_register_of_legislation:F2019N00027
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of Issuer Payments and Issuer Receipts.
The following sections discuss these areas of potential clarification.

     2.2.1             Issuer Payments as payments for 'core services'
In informal consultation, some stakeholders sought clarity on what payments could be considered Issuer Payments under the standards; this concept effectively sets an upper limit for financial incentives and other benefits that can be provided to the issuer without breaching the requirement that there be no net compensation. In particular, stakeholders sought clarification on whether the standards intended to capture, as Issuer Payments, fees for services that are not essential to the issuance of cards, for example fees paid for the provision of loyalty services. Stakeholders noted that there were inconsistent views across the industry on this matter.
Under the standards, Issuer Payments are the total amount of fees (or 'benefits') related to cards or card transactions that are paid by an issuer to the scheme. The standards refer to these as including 'Scheme branding fees; processing fees; and assessment fees'. The Bank considers that one way to improve the clarity of the definition in a manner that is consistent with the purpose and intent of the standards would be to explicitly define Issuer Payments as those payments made to schemes (or their associated entities) for 'core services' provided by the scheme to the issuer – namely, those services that are the minimum necessary for the issuer to effectively participate in a scheme and which are provided to issuers in the scheme globally in exchange for scheme and other processing fees. These services are likely to include the licensing of scheme branding, as well as transaction processing and assessment services, and basic relationship management services. As issuers may not have visibility over all services that a scheme provides to other issuers globally, this approach would require schemes to notify their issuers of which services meet the global provision test.
This definition makes it clear that fees or payments for non-core services – such as the loyalty services example raised by stakeholders – are not captured in Issuer Payments. The Bank notes that an unduly wide definition could enable an extensive range of payments made for bundled and optional services to be included in Issuer Payments, creating potential for substantial payment of incentives to particular issuers. The scope for this to occur could grow as schemes become involved in more parts of the payment value chain and provide a wider range of services to issuers. In view of this, and the likelihood that an increase in incentives paid will lead to an increase in merchants' cost of accepting card payments (similar to an increase in interchange fees), an unduly wide definition of Issuer Payments is unlikely to be