The Australian Debit Card Market: Default Settings and Tokenisation – Conclusions Paper

The Bank has released a Conclusions Paper setting out the conclusions of its recent public consultation on options for further enhancing the competitiveness, efficiency and safety of Australia’s debit card market. As noted in the Payments System Board’s post-meeting media release in August, the key conclusions are:

• The Board decided that it will not continue to explore prohibiting the setting of a default routing network on dual-network debit cards (DNDCs). Stakeholders’ feedback indicated that any benefits from such a prohibition would likely be outweighed by the costs and risks involved. In particular, prohibiting the setting of a priority network would raise the risk of failed transactions and would be costly as all DNDCs would need to be re-issued.
• The Board, however, remains strongly supportive of merchants having the ability to choose their preferred debit card network through least-cost routing (LCR). The Board expects providers to make faster progress on enabling LCR for merchants that could benefit from it. If providers do not make substantial progress in enabling LCR for more merchants by June 2024, the Bank will explore imposing a formal regulatory requirement on providers to enable LCR for their merchants. Going forward, the Board also expects the industry to implement new form factors in a way that is compatible with LCR from the outset.
• The Board decided that following further consultation with industry, the Bank will endeavour to publish high-level expectations on the tokenisation of payment cards by the end of 2023. These expectations will be aimed at helping to improve security, efficiency and competition for online card payments. The Bank has asked Australian Payments Network (AusPayNet) to coordinate the industry’s work to meet the Bank’s expectations and to draft more specific tokenisation standards if required.