The Australian Competition and Consumer Commission (ACCC) has received an application to authorise a merger deal between BPAY, eftpos and New Payments Platform Australia (NPPA) under a new entity (NewCo) by way of share acquisition.
The National Retailers Association (NRA) and Australian Lottery and Newsagents Association (ALNA) have provided submissions to the ACCC regarding the proposed merger, expressing concern about the potential impact the consolidation will have on Least Cost Routing, which ensures contactless card transactions are processed through the cheapest payments network.
Currently, most ‘tap and go’ payments are routed through more expensive international networks, such as Mastercard or Visa, instead of eftpos, costing Australian retailers and merchants millions of dollars in fees.
The latest Global Payments Report by fintech company, FIS, has shown that Australia is on track to having only 2% of transactions via cash with the Covid-19 pandemic accelerating the transition towards electronic payments.
The NRA is concerned that the marriage between big banks and large retailers would lock out small business, erode competition between electronic providers and ultimately fail to address the key issue of Least Cost Routing, it states in its submission to the ACCC.
“For those reasons, the NRA urges the ACCC to reject the application to amalgamate BPAY, eftpos and NPPA… the structure of NewCo, if this entity were to be approved, would lack the incentives needed to help small business at a time of great economic turbulence,” the submission says.
There is a proposal for a small business subcommittee, but the NRA believes this is not enough as small business should be afforded equal representation.
The NRA is also concerned that the proposed merger does “little or nothing” to purse increasing the availability of Least Cost Routing.
“The absence of small business representation on the Board of the proposed NewsCo does little to instill confidence that it would vigorously pursue reform that provides cheaper merchant fees for smaller operators,” the submission says.
The ALNA recognises the importance of a competitive and cost-effective domestic debit system but is concerned that the merger may lessen competition and hamper innovation in the payments sector.
“This may lead to stagnation of effective payment cost reductions in the marketplace and would provide no discernible public benefit. It may also derail constructive work in relation to least cost routing for small business that remains poorly adopted and endorsed,” the submission from the ALNA states.
The Industry Committee Administration believes the amalgamation should be authorised because it will not likely substantially lessen competition and will likely give rise to a net benefit to the Australian public.
However, the ALNA says the deal involves three active competitors, mostly supported by major banks, coming under control. “Those that previously competed will no longer do so, even if they have the fiction of operating separately, an old anti-competitive ploy.”
Further, the ALNA raises the public benefit issue, suggesting that the list of claimed public benefits are either illusory or private benefits. “There is no hard evidence of public benefits, just wishful thinking.”