Although the Reserve Bank of Australia isn’t happy within the role, its Payments System Board will continue to regulate credit card fees for at least a while yet, according to Malcolm Edey, the central bank’s assistant governor.

“The Reserve Bank is a reluctant regulator,” said Dr. Edey, speaking at a Sydney conference for the payments industry. “We’d prefer to see fees being held down by competition than by regulation.”

In August 2009 the PSB reconsidered a prior decision to reduce credit card interchange fees from 0.5% to 0.3% through regulation, as financial institutions involved in the credit card industry had taken “steps to reduce the risk that fees would rise in the absence of regulation.” However, the regulatory change remains a possibility.

Dr. Edey acknowledged that there had been progress on industry reform, but stated that the PSB had not yet decided whether sufficient progress had been achieved to cease direct regulation of credit card interchange fees.

He also was not prepared to give any timeline as to when any regulatory changes could be made.

“I know many of you involved in the industry would like me to give some predictions or clues about what the board’s next decision on these matters might be,” said Dr. Edey. “I’m not in a position to make that kind of prediction today.”

Some of the PSB’s accomplishments, since their oversight of the market began in 2001, include:
•    Reducing fees on EFTPOS transactions
•    Capping fees on debit card transactions
•    Increasing competition amongst credit card issuing financial institutions by forbidding certain rules they had written into their schemes

The results have strongly affected the ways Australians pay for goods and services and manage their money. Dr. Edey stated that there are 20 million charge and credit cards issued to Australians, but 40 million debit cards.

Source: http://www.heraldsun.com.au