The industry committee advancing the case for combining Australia’s three domestic payments schemes has urged the ACCC to approve the proposed merger because it will improve competition.
The committee, which includes representatives from the four major banks, Cuscal and Woolworths, is facing an uphill task to win approval for joining the operations of Eftpos Australia, the NPP and BPay after the regulator indicated in early June that a union could substantially lessen competition in the payments market.
Industry committee chair Robert Milliner yesterday warned that each of the merger candidates would find it more challenging to compete against the international card schemes if the ACCC rejected the application.
“An efficient merged entity will be better able to compete against the international card schemes who currently dominate the market,” he said.
“Visa and Mastercard have revenues of USD$21 and USD$15 billion respectively.
“This compares to eftpos, BPAY Group and NPP who all have annual revenues of less than $75 million.
“By bringing the three schemes under a single board, they will be able to bring new payments solutions to market faster, continue to put pricing pressure on international card schemes and work in the best interests of Australian consumers and businesses of all sizes.”
Milliner said the industry committee had assured the ACCC that Eftpos would be preserved and strengthened so that it remained a source of pricing tension against the global card schemes and big tech players such as Apple and Google.
In its statement of preliminary views published on 4 June, the ACCC said it was assessing concerns raised by small business groups that least cost routing services might be neglected or abandoned if the merger was approved.
Least cost routing (LCR) is a service provided by banks that allows merchants to direct contactless debit card payments to the cheapest processing network.
Eftpos is viewed by most small business groups such as COSBOA and the Master Grocers Association as the cheapest processor of contactless transactions in Australia.
In a submission responding to the ACCC’s preliminary findings, the industry committee said that least cost routing was primarily a matter for the Reserve Bank in terms of regulatory policy.
“The implementation of LCR depends on delivery by acquirers (and, in the case of online transactions, gateways) and uptake by merchants,” the committee told the ACCC.
“Eftpos (and potentially in the future NewCo) can encourage and influence these parties to utilise LCR.
“However, neither NewCo or eftpos have the ability to directly deliver or increase the availability of LCR.”
Milliner said that least cost routing would not be impacted by the merger.
“In order for eftpos to remain a source of competitive pricing tension with international card schemes and thus sustain LCR, we need a more efficient and competitive domestic scheme which this merger is seeking to create,” he said.
Payments expert Lance Blockley, who prepared a supplementary submission to the ACCC in support of the merger, indicated that LCR could disappear as a service option for merchants if the application was rejected.
“Least cost routing relies on the survival of the Eftpos debit card scheme and in my opinion the survival of the Eftpos scheme relies on the consolidation,” he said.
NPP Australia chief Adrian Lovney said the prospect of working alongside Eftpos and BPay would allow the merger partners to realise innovations and technologies that would not be possible under the status quo.
“Put simply, this amalgamation makes sense and will better equip all three Australian schemes for the future,” he said.
The ACCC is expected to publish a final determination on the merger application before the end of this month.