FYI - Too lazy to start another...

FYI - Too lazy to start another thread

http://www.businessday.com.au/business/rba-warns-on-payment-reforms-20090325-9afa.html

RBA warns on payment reforms
March 25, 2009 - 7:30PM

The Reserve Bank of Australia would use its regulatory power to coerce necessary changes to the nation's payments system if industry participants were reluctant on reform, governor Glenn Stevens says.

Mr Stevens said on Wednesday that the central bank sought a balance between co-operation and the competition benefits of reform and welcomed industry solutions.

''But it is and must be also prepared, if needed, to use its regulatory powers more forcefully,'' he said in a speech on Wednesday.

''In judging which approach is preferred, we will respond to the industry's behaviour, just as they respond to ours.''

Mr Stevens pointed to the example of recent reforms in the Automated Teller Machine (ATM) market.

Consumers were now presented on screen with the cost for using an ATM other than one from their own bank. This compared with before the recent most reforms where the user first saw the charges on their bank account at the end of the month.

Small institutions only considered a system that would allow them to create fee-free networks among themselves, as they would be at a disadvantage to banks with larger ATM networks, Mr Stevens said.

He said larger institutions recognised a chance to gain a competitive advantage if smaller banks were unable to form fee-free networks.

''With each of the parties having different objectives, consensus was hard to achieve,'' he said.

''In short, there were problems because there was no participant in the system thinking of the benefit to the system as a whole with the power to effect change.''

Mr Stevens said the history of the ATM reforms demonstrated the difficulty for pure industry-based reform without a push from a public policy body in Australia.

The RBA could also play a role in the further development of the EFTPOS card payment system, which consumers use to pay for goods and services in shops, Mr Stevens noted.

Suggested changes would allow users to send payments into customer accounts in real time, instead of transferring money from customer accounts to merchant accounts.

Governments were the primary driver for that change so they could ensure benefit payments reached the recipient swiftly - such as when providing emergency funds after a natural disaster.

''While some participants in the industry have seen benefit in expanding the EFTPOS message format to enable such transactions, there has been limited progress,'' Mr Stevens said.

''A requirement by the Reserve Bank that all participants in the industry be able to accept instructions conforming to a common message standard would facilitate the access of new entrants, and thus competition.''

Mr Stevens said the RBA recognised that the roles of industry participants and the regulator were ''mutually independent''.

''We trust that the industry does, too.''

He said the Payment's System Board, which operated out of the RBA, was content to encourage industry solutions and be a catalyst for change, but it would be more active if needed.

''We look forward to effective engagement with the industry in the process,'' he said.