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Presentation to Australian Smart Cards Summit 2007: Review of Payments System Reforms

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Presentation to Australian Smart Cards Summit 2007: Review of Payments System Reforms Review of Payments System Reforms Michele Bullock Head of Payments Policy Reserve Bank of Australia Overview 1. Scope of the review 2. What issues are being addressed? 3. Developments since the reforms? 4. Progress on the studies 5. Where to from here? Scope Credit cards EFTPOS Scheme debit American Express/Diners Club BPAY ATMs The Issues Source: The Australian What are the Issues? Effects of the reforms? Alternatives to regulation? Changes to current regulations? Developments In the market? Overseas? Analysis? Non-cash Payments per Capita* Per year No No 60 60 Cheques Credit cards 50 50 Debit cards 40 40 Direct credits 30 30 20 20 Direct debits 10 10 BPAY 0 0 1994 19961998 2000 2002 2004 2006 *Debit and credit card data prior to 2002 have been adjusted for a break in the series due to an expansion in the coverage of the Retail Payments Statistics in 2002. Sources: ABS; APCA; BPAY; RBA Number of Card Payments Year-on-year growth %% 30 30 Credit 20 20 Debit 10 10 0 0 1997 1999 2001 2003 2005 2007 Source: RBA Market Shares of Card Schemes By value of purchases % Bankcard, MasterCard and Visa % 90 90 85 85 % American Express and Diners Club % 15 15 10 10 5 5 2002 2003 2004 2005 2006 2007 Source: RBA Merchants Surcharging Credit Cards* Per cent of surveyed merchants %% 12 12 Very large merchants Large merchants 8 8 Small merchants 4 4 Very small merchants 0 0 Jun 2005 Dec 2005 Jun 2006 Dec 2006 * Very large merchants are those with turnover greater than $340 million, large merchants $20 million to $340 million, small merchants $5 million to $20 million and very small merchants $1 million to $5 million. Source: East & Partners Pty Ltd Interchange Fees on a $100 Payment Exclusive of GST Merchant's bank Cardholder's bank Credit cards Scheme debit EFTPOS Pre reform Post reform -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 $ Source: RBA Merchant Service Fees Per cent of transaction values acquired % % American Express 2.5 2.5 Diners Club 2.0 2.0 1.5 1.5 1.0 1.0 Bankcard, MasterCard and Visa 0.5 0.5 0.0 0.0 2003 2004 2005 2006 2007 Source: RBA Credit Card Rewards Programs Four major banks Average spending required Benefit to cardholder as a for $100 voucher proportion of spending (bp) 2003 12 400 81 2004 14 400 69 2005 15 100 66 2006 16 000 63 2007 16 200 62 Sources: Banks websites, ANZ Telstra Rewards Visa Card, Commonwealth Bank MasterCard Awards card, National Australia Bank Visa Gold card, Westpac Altitude MasterCard. The Studies Use of payment instruments – Cash still important – Industry specific patterns Costs of payment instruments Where To Now? Submissions 31 August Conference 29 November Draft conclusions April 2008 Standards/Access Regimes end 2008 .
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