Replies to post #6824 on Market Sense and Sentiment (MKTSS)

[bbgold]

Credit Card Industry Change Unveiled

08/27/2002 08:26:54 EST
SYDNEY, Australia (AP) - Australia's central bank on Tuesday unveiled a major reorganization of the credit card industry that is designed to reduce fees and ensure greater competition.

International card providers MasterCard and Visa said the Reserve Bank of Australia's changes had the potential to destroy the nation's credit card system, and banks said they stood to lose millions.

The long-awaited reforms call for a 40 percent reduction in credit card interchange fees, which are paid by one financial institution to another for providing card transaction processing to retailers.

It also opens up the payments system to new entrants and gives merchants the green light to pass on the cost of transactions to consumers.

Reserve Bank Governor Ian Macfarlane said the new rules are balanced and will work to the "benefit of the Australian community as a whole."

"The reforms will reduce the size of the transfer from the community to financial institutions for credit card usage and will, over time, promote genuine competition on credit card interest rates," he said.

Long a critic of bank charges, Treasurer Peter Costello said the government supports the reforms, some of which begin in January 2003.

But Visa said it may launch a legal challenge to the reforms and the central bank's authority to impose them.

"We have always maintained it is on the agenda, and it still remains on the agenda," said Visa International spokesman Peter Vicary.

MasterCard general manager for Australia and Asia, Leigh Clapham, said the changes would add "huge costs to consumers and businesses, force many issuers out of the industry and may well destroy the system."

One of Australia's four banks, ANZ Banking Group Ltd., said its 2004 net profit would be cut 40 million Australian dollars ($21.6 million) by the reforms.

The reforms apply to schemes operated in Australia by Bankcard, MasterCard and Visa, which are subject to Reserve Bank regulation. Credit schemes operated by American Express Co. and Diners Club aren't subject to these reforms, but they will also abide by the decision to allow merchants to recover costs.



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