In the Payments System Board Update for August 2023, the Board has disclosed that it has decided that it would not further explore prohibiting card schemes and issuers from setting a default routing network on dual-network debit cards (with one network on the card having priority) as a result of feedback which indicated that such a prohibition could result in failed transactions and require a costly re-issuance of all debit cards.

The Board says it remains strongly supportive of merchants having the ability to choose their preferred debit card network through least-cost routing (LCR). While LCR is now widely available to merchants for in-store transactions from a technical perspective, the functionality has not been enabled for many merchants.

The Reserve Bank has previously published LCR reporting from large providers, which indicates that 54 per cent of their merchant customers had LCR enabled for in-store transactions at the end of June, with this share only increasing marginally over the year. Further, the RBA says the industry has not made sufficient progress in enabling LCR for online transactions, with only a few providers making LCR widely available to their merchants for online transactions.

In an issues paper released in June 2023, the RBA said it was considering a measure that would prohibit banks from automatically directing contactless debit transactions to Visa and Mastercard.

Subsequently the RBA published undertakings from Mastercard and Visa to the Reserve Bank that they will not engage in tying conduct involving their debit and credit card products. The undertakings address the Resersve Bank’s concerns that the international schemes could engage in conduct that would limit competitive pressure in the debit card market, which has the potential to impose additional costs on the payments system.

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