The RBA announced today that it has decided to seek the removal of the current specialist credit card institution (SCCI) framework.
What this means is that credit card issuers and acquirers will no longer need to be authorised under the Banking Act as an SCCI.
SCCIs are a type of Authorised Deposit Taking Institution (ADI) and in many respects they are regulated by APRA in the same way as traditional deposit taking ADIs. For example, SCCIs are required to comply with many of APRA’s prudential standards including those relating to capital adequacy. This level of regulation has put Australia out of step with the approach taken in many other jurisdictions and was seen by many as unnecessary given the risks generated in credit card business.
The SCCI authorisation process created significant barriers to entry for foreign credit card issuers and acquirers who were daunted by the initial and ongoing costs associated with maintaining an SCCI authorisation. For this reason, credit card acquiring in Australia has been denominated by the Australian banks and GE. These reforms will pave the way for new entrants to the market bringing efficiency, technological innovation and competition. Over time this may threaten the Australian banks domination of this space.
The RBA also announced changes to the Visa and MasterCard Access Regimes to ensure that these schemes remain open to non-ADI participants after the removal of the SCCI framework.