Australian Payments Plus has revealed its debit payments processing subsidiary – Eftpos - is reclaiming market share from global giants Visa and Mastercard thanks to increased take-up of least cost routing and a surge in demand for its new online payments service.
In response to questions from Banking Day after the publication of its 2023 financial accounts, AP Plus said Eftpos now accounts for one quarter of the domestic online debit payments market.
The service, which opened the way for holders of Eftpos-enabled debit cards to make purchases over the internet, was launched only 16 months ago.
“In card-not-present (online transactions) where Eftpos only launched its offering in July 2022, after the formation of Australian Payments Plus, Eftpos has built more than 25 per cent market share in this segment, which is impressive growth in that time,” the AP Plus spokesperson said.
Reserve Bank data indicates that Australians executed about 1.61 billion online payments using debit cards in the 12 months to the end of August that were worth approximately A$127 billion.
This implies Eftpos has augmented its transaction volumes by more than $30 billion since entering the online processing market.
Eftpos’ successful launch in online payments comes ahead of a widely anticipated push into mobile payments over the next two years as leading banks scramble to meet a Reserve Bank expectation that they have least cost routing (LCR) enabled for digital wallet transactions by the end of 2024.
The AP Plus spokesperson said the company was working with digital wallet providers to develop mobile LCR solutions and finalise plans with card issuers and acquirers to support compliance with the RBA’s expectation.
Least cost routing is a service that allows retailers and payment gateways to select the scheme that processes their debit transactions.
Eftpos generally benefits from wider LCR take-up because it processes debit transactions at a lower average cost than Visa and Mastercard.
The AP Plus spokesperson also revealed that, since the three-way merger of Eftpos, BPay and the New Payments Platform (to form AP Plus) was approved by the ACCC in September 2021, independent audits had found AP Plus complied with undertakings it gave the regulator to promote Eftpos’ market presence.
“Reports from the ACCC-appointed independent assessor of our undertakings have been submitted to the ACCC on 9 October 2022, 9 March 2023, and 9 August 2023 and have determined that AP+ has met each of the elements of the undertakings for each of those audits,” the spokesperson said.
According to financial accounts lodged with ASIC in the last week, AP Plus and its subsidiaries generated a net profit of $61.4 million in the 12 months to the end of June 2023.
This was the first AP Plus result that included 12-month contributions from each of the merged businesses.
The bottom line was heavily influenced by a $40.7 million tax benefit flowing from the decision of each of the payments schemes to form a consolidated tax entity.
The result was also enhanced by an $8.9 million writeback to earnings of contingent payments on the acquisition in 2020 of the Beem instant payments business from its previous bank owners.
Directors of AP Plus formed a view that the contingent payments were no longer required to be made.
AP Plus posted a pre-tax operating profit of $12.7 million from a revenue base of $228.8 million.
However, the financial statements provided scant insight into how each of the operating entities had performed as standalone businesses.
Given its recent market share gains, Eftpos appears to be the largest earnings generator for the group, with the AP Plus spokesperson indicating BPay’s transaction volumes flat-lined in 2023.
“BPAY transaction volumes remain flat within a competitive market,” the spokesperson said.
“We have kicked off a program of work to design the next generation of BPAY for the next 30 years.
“We really want to take BPAY on a journey – what we call BPAY Next Generation, taking BPAY, a product that's known and loved, into a more contemporary, digitally enabled, data rich environment for the next generation, so that it survives for another 25 years.”
In response to a question on whether AP Plus could provide some disclosure on the revenue growth and profitability of the New Payments Platform, the spokesperson said such information was not required to be disclosed in the audited financial statement.
“NPP currently utilises a fixed contribution model to cover the costs of operating the NPP,” the spokesperson said.
“Hence revenue and contribution to AP+ results remain stable, regardless of transaction volumes.”