Document ID: chunk:federal_register_of_legislation:F2019N00027:body:0:p6
Version: federal_register_of_legislation:F2019N00027
Segment Type: other
Provision Reference: 
Character Range: 13541–16481

occurs during the life of the contract.

Proposal 1:
The Bank's Standards No. 1 and No. 2 of 2016 would be modified to require an accrual approach to be used to allocate Issuer Receipts and Issuer Payments to, or between, reporting periods in a manner consistent with the purpose and intent of the standards, such that in determining net compensation certifying entities have more scope to draw on information from financial accounts prepared in line with generally accepted Australian accounting principles. Compliance would not be permitted on a cash or quasi-cash basis.[12]

2.2                 Definitions of Issuer Payments and Issuer Receipts
There are some key concepts underlying the net compensation provisions in the Bank's standards:
    * The Bank has placed caps on interchange fees. In the absence of interchange fee caps, competition between schemes tends to place upward pressure on the level of interchange fees.
    * Schemes often provide rebates, discounts and other incentives to issuers. These incentives may be aimed at increasing the issuance or use of a particular scheme's cards, driving adoption of particular features of a scheme's technology, or establishing some level of exclusivity for that scheme in card issuance.
    * Schemes also have other financial flows with their participants – most notably, they levy a range of scheme and processing fees on both issuers and acquirers. By increasing the incentives it pays to its issuers and increasing such fees levied on its acquirers, a scheme can in effect create a value flow that is equivalent to an interchange fee paid by acquirers to issuers.
    * The 'net compensation' provisions were introduced as a means of ensuring that incentives to issuers could not be used to circumvent the Bank's interchange fee caps.
The standards implement the restriction on net compensation by establishing two defined concepts: Issuer Receipts and Issuer Payments, and stipulate that the former cannot be larger than the latter.[13]
Generally, the most economically significant flows of value between schemes and issuers are the various scheme and other fees paid by issuers to schemes, and benefits paid by schemes to issuers as cash or scheme fee rebates; there are also a range of non-cash benefits provided by schemes to issuers. Overall, the Bank believes the standards are at present flexible enough to capture most relevant flows. However, feedback from the initial compliance certifications and informal consultation with stakeholders indicated that there would be benefit in greater clarity being provided on what should be captured by the definitions 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