Yesterday, the Commerce Commission (Commission) released a consultation paper on its proposal to recommend the designation of the interbank payment network under the Retail Payment System Act 2022 (the Act).
The Commission has not yet decided whether to make the recommendation and is inviting affected participants to make submissions.
Who should read this? Why?
The interbank payment network is the largest retail payment network in New Zealand and involves all bank transfers, direct debits, and automatic payments amongst other payment instruments. The proposed designation will impact registered banks, third party payment providers and businesses who operate in the interbank payment network, as well as consumers.
What does it cover?
The new consultation paper follows the Commission’s preliminary view in July last year, which asserted that designating the interbank payment network was necessary to complement the industry’s efforts and overcome barriers hindering the implementation of a thriving API-enabled payment ecosystem. In February 2024, the Commission published an open letter outlining its intention to proceed with this consultation, emphasising the lack of innovation to current payment options which would allow New Zealanders to make payments quickly and securely between bank accounts.
The proposal involves designating payment networks where Payments NZ is a network operator. The proposed designation aims to capture all bank payment instruments between registered banks or within a registered bank for the payment of goods or services initiated by either a consumer or a merchant as the payee, with payment instructions sent directly to the payer’s bank. This includes all payment instruments, such as direct credits and direct debits, irrespective of the method of initiation. For example, a consumer may initiate a payment either directly or indirectly through a third party.
When a network is designated under the Act, the Commission has powers to regulate fees and to issue network standards that outline requirements for the designated network, which participants must comply with, among other powers. The Mastercard credit, Visa credit, Mastercard debit and Visa debit retail payment networks have already been designated under the Act since 2022, with an initial pricing standard capping the interchange fees.
On its current proposal, the Commission states that designating the interbank payment network will not automatically lead to the imposition of regulations or standards on participants. Rather, the Commission considers the designation as an enabler for delivering timely intervention, should it become necessary or desirable. The Commission sees designation as the minimum reasonable intervention required to promote the timely delivery of a thriving API-enabled ecosystem. The proposed designation could require participants to adhere to industry-led solutions for API-enabled payments and expose them to a penalties regime for failing to meet the relevant requirements.
What next?
The consultation runs from now until 10 May 2024.
We encourage all affected participants to engage with the consultation processes to help inform the development of the proposed designation.
If you have any questions relating to the proposed designation, or the Act in general, or want to know how it may affect your business, please contact one of our experts.
This article was co-authored by Ken Ng, an Associate in our Banking and Financial Services team.
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