3. Card Payments - Issuing cards in Australia
Direct card issuers
Direct issuers are typically ADIs that directly manage all the relationships (clearing, settlement, technology, and regulatory) needed to process card payments in Australia.
To interface with other participants in the card payments system, a direct issuer needs to establish some key relationships:
- RBA settlement account. Direct issuers must have their own RBA Exchange Settlement Account (ESA), which is used to settle financial obligations arising from the clearing of payments. Once the RBA approves the opening of a new issuer’s ESA account, the issuer has to become a member of the RBA’s high-value settlement system, RITS. RITS acts like an online banking facility for ESA holders and is used to settle payments on a Real-Time Gross Settlement (RTGS) basis. The RBA publishes eligibility criteria for establishing an ESA.
- AusPayNet compliance. Direct issuers should consider becoming a member of the IAC. Under its Code Set, the IAC gives participants assurance that their partners meet certain minimum security, interoperability and efficiency standards, including for all point-of-sale technology, ATMs and unattended devices. AusPayNet also manages the AIN-BIN database, which houses all the unique identifiers critical to routing transactions to the right issuers or acquirers. Acquirers and issuers should be part of this database so that other participants can recognise their identifiers.
- Community of Interest Network (COIN). COIN is a virtual private telecommunication network that supports low-value payments (not only cards but also direct entry and cheques). Telstra owns the infrastructure but AusPayNet sets the regulatory framework governing who can connect and what traffic they can send over the network. The COIN is an efficient way for direct payment participants to connect to each other and share low-value payment files.
- Card schemes. Organisations need to apply to a card scheme to become an issuer of its cards in Australia. Once approved, the scheme will help the issuer obtain a unique Bank Identification Number (BIN) or Issuer Identification Number (IIN) from the International Standards Organisation (ISO) or Standards Australia (SA).
- Personalisation bureau for card generation. Personalisation bureaus print and send cards and Personal Identification Numbers (PINs) to the cardholders of direct issuers. Cards issued must follow specifications for card design and functionality.
Indirect card issuers
Issuers can also access the card system indirectly through a commercial arrangement with a direct issuer. In this model, the direct issuer provides some or all the following services:
- Representation within AusPayNet’s IAC, including maintaining BINs in the AIN-BIN database
- Sponsorship into the appropriate card scheme(s)
- Access to a personalisation bureau for card issuance
- Technical capability including for switching and card management systems
- Settlement of card transactions into a nominated ESA, including reconciliation services
- Fraud management solutions
- Mobile wallets if that is part of the offering to cardholders.
Other considerations for card issuers
In Australia, dual network or multi-network debit cards are very common. These give cardholders access to both eftpos and an international card scheme. To issue a dual-network debit card, issuers must engage with both schemes.
The vast majority of card transactions in Australia are contactless. Furthermore, consumers are increasingly adopting mobile payments. To offer this functionality, issuers need to set up agreements with mobile payment providers such as Apple Pay, Google Pay and Samsung Pay.
In recent years card-not-present (CNP) fraud has grown in line with the increase in e-commerce. As part of an industry approach to reducing CNP fraud, card issuers need to have certain CNP fraud mitigation strategies in place. More information is available here.
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