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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 the consultation paper and proposed variations to the Standards. More detail about the purpose and effect of the proposed variations is set out in that consultation paper.
Submissions
Interested parties are invited to make submissions on the proposed variation to the Standards and the Bank's reasoning as set out in the attached consultation paper, Interchange Standards and Net Compensation: Consultation Paper, a copy of which is also available on the Reserve Bank's website www.rba.gov.au.
Submissions should be made by 28 March 2019 to:
PYSubmissions@rba.gov.au
or
Head of Payments Policy
Reserve Bank of Australia
GPO Box 3947
Sydney NSW 2001

Signed

Philip Lowe
Governor
Reserve Bank of Australia
20 March 2019

The Operation of the Interchange Standards: Consultation Paper
February 2019

Contents
1. Introduction
2. Issues for Consultation
3. Next Steps
Appendix A: Draft Variation to Standards

1.              Introduction
The Reserve Bank conducted a review of its card payments regulation in 2015–16, which concluded with the determination of new standards relating to interchange fees and merchant pricing in designated card schemes.[1] The interchange standards introduced new requirements relating to the payment of 'net compensation' between card schemes and issuers. These provisions were 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.
Under the standards, schemes and issuers in designated schemes are required to certify to the Bank annually that they have complied with certain provisions, including the net compensation provision. The initial certifications in relation to the net compensation requirement were provided in August 2018 and related to the first reporting period that ended on 30 June 2018. This initial certification process indicated that the new standards were working as intended from a broad policy perspective. However, it also suggested that there were some issues with the interpretation of the net compensation provision that might benefit from some clarification, and areas where some potential minor variations to the standards might be beneficial.
Accordingly, over recent months, the Bank has sought informal views from stakeholders on the operation of the net compensation requirement. This included views on how the requirement could be modified to improve clarity, minimise compliance burden, or otherwise support the operation of the standards, without changing their purpose or substantive effect.
This consultation paper describes the issues where stakeholders have sought clarification and guidance or suggested changes to the standards, and sets out the Bank's proposed options to address them. Appendix