Who should regulate the interchange fee?: the RBA or the ACCC

A new academic report, released today by the Australian Taxpayers’ Alliance, argues that the regulatory function over the payments system should be removed from the Reserve Bank and placed with a transparent specialist agency with capabilities and experience in regulating competition and industrial organisation. It highlights the case that there has never been a strong case for two distinct functions – monetary policy, and regulating the payments system – to be contained within the same agency.

The new report also deals with the issue of consumer-facing transparency in bank and credit card fees, and uses economic theory to explain why there is no transparency issue about disclosure of interchange fees. Instead, the report notes the more serious transparency problem – that is, the secrecy of the RBA’s Payments Board which is responsible for regulating interchange fees. This is non-minuted body that is not required to published reasons for their decisions; it has a lack of transparency and accountability.

The report ‘Who should regulate the interchange fee?: the RBA or the ACCC?’ was prepared by two Australian economists Sinclair Davidson and Jason Potts, both of whom are Professors in the School of Economics, Finance and Marketing at RMIT University.

This new report follows the previous release of Australian Interchange Fee Regulation: A Regulation in Search of Market Failure – also authored by Professors Davidson and Potts – which highlighted that there is no theoretical basis for regulation of interchange fees by the Reserve Bank.

These reports are the expert economic analysis underlying the ATA’s submission to the current Senate inquiry by the Senate Standing Committee on Economics.

Click HERE to download the report.

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