Central Banking

RBA's Macfarlane on Gresham's Law of payments

In a speech on 'Gresham's Law of payments' given on 23 March, Ian Macfarlane of the Reserve Bank of Australia said one of the longer term aims of the RBA's reforms was to reduce the distortions in the payments system caused by interchange fees.
In a speech on 'Gresham's Law of payments' given on 23 March, Ian Macfarlane of the Reserve Bank of Australia said one of the longer term aims of the RBA's reforms was to reduce the distortions in the payments system caused by interchange fees.

These are the transaction fees paid between a cardholder's and a merchant's financial institution - in the EFTPOS and Visa debit systems.

"If large differences in the fees in the credit card and EFTPOS systems continue, it is hard to see why in the long run banks would continue to put resources into promoting the EFTPOS system," Mr Macfarlane said.

"This is why we think that the merchants who oppose our EFTPOS reforms are extremely short-sighted.

"Without the proposed reforms, we could see a gradual withering away of the EFTPOS system, so that the merchants would face a larger and larger proportion of their sales taking place using the higher cost credit card system."

To read past central bank speeches use our Speech Finder. Click the link on the right.

Speech by I.J. Macfarlane, Governor of the Reserve Bank of Australia to AIBF Industry Forum 2005, Sydney - 23 March 2005.

Click here to read the speech "Gresham's Law of payments" on the Reserve Bank of Australia's website

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