Reserve Bank of Australia leadership asked its payments policy team to hunt for practical ways to lighten regulatory pressure on smaller banks and fintechs, yet the eventual options went nowhere.
The work formed part of a broader review of the payments system, triggered after the federal government pushed regulators to come up with productivity boosting ideas.
Internal documents, released under freedom of information laws and examined by Capital Brief, reveal the central bank’s suggestions were ruled out as unworkable.
Regulators struggled to translate political pressure for reform into concrete, low burden changes.
Background material in the documents points to the RBA’s high profile merchant costs and surcharging review, published last year, as the vehicle for the government’s productivity agenda.
The Treasurer and Finance Minister had written to 30 regulators and eight department heads seeking proposals to lift productivity ahead of an economic roundtable.
In response, the RBA governor told the payments policy team to explore how card payment rules might be relaxed for smaller issuers, including smaller banks and fintech players.
An August memo from the policy team outlined a preliminary assessment of that brief and set expectations on what might realistically be achieved.
The internal assessment suggested that tailoring card payment regulations for small issuers created more complexity than benefit, given the tightly interconnected nature of the payments system.
Any carve out for small banks and fintechs risked fragmenting compliance obligations and increasing costs elsewhere in the system, undermining the government’s desire for productivity gains.
Officials were also wary of unintended consequences for competition between large and small issuers if different regulatory standards applied.
Those concerns saw the proposals shelved, despite the clear political appetite for regulatory relief in the sector.
