BPAY Group has dropped several bombshells that could imperil the proposed union of Australia’s three domestic payments schemes.
In a submission to the ACCC, which is bound to infuriate BPAY’s major bank shareholders, the company’s management blames changes to NPP Australia’s business model for a recent decision by its board to impair the carrying value of its Osko payments service.
Osko is an overlay service provider on the New Payments Platform that now faces competition from a service being developed by the NPPA.
Apart from revealing apparent strategic tensions between the managements of BPAY and NPPA, the submission could imperil the merger because it highlights emerging spheres of competition between the merger partners and alleged weaknesses in the NPP’s governance.
“In BPAY’s view, the initial design of the NPPA implicitly contemplated facilitating a competitive market for overlay services,” BPAY said in the submission.
“NPPA has now expanded its remit beyond provision of the NPP basic infrastructure to now provide business services of its own using the NPP, which is a direct alternative with BPAY’s role as an overlay service provider.
“The expansion of the NPPA into the provision of business services in BPAY’s view may create conflicting interests on the introduction of new initiatives.”
The BPAY submission, which was signed by one of the company’s senior executives, Mark Williams, advances arguments that challenge assertions made by the stakeholder committee that is coordinating the merger of BPAY, Eftpos and the NPPA.
In its application to the ACCC, the Industry Administration Committee (IAC) argues that the three schemes offer payments services that are largely complementary.
“The three Australian payments schemes own and operate largely complementary assets and do not offer services that are close substitutes for each other…BPAY’s Osko service is complementary to NPPA’s core fast A2A service and is not a substitute for it,” the IAC states in its application.
However, BPAY Group revealed in its submission that the decision by major banks to provide financial backing for NPPA’s yet-to-be-launched Mandated Payment Service (MPS) meant there was no longer bank support for BPAY’s plans to add similar capability to its Osko business.
The fallout for BPAY is that it has been forced to impair the Osko asset because it is unable to roll out the third and potentially second stages of the service.
BPAY told the ACCC: “…given the potential overlapping capabilities of the BPAY and NPPA platform services, priority for service implementation and bank implementation funding between BPAY and NPPA, has resulted in priority currently being given to MPS, over Osko service 3.”
“As a result, BPAY Group has impaired the assets (Osko service 3) by approximately (confidential) with a further (confidential) to be impaired should Osko service 2 not proceed.”
BPAY Group indicates in the submission that since the New Payments Platform was launched in February 2018, the NPPA had contributed to “confusion” among Osko customers.
“An early example of conflicting interests was the late introduction of the intention to create a consumer facing brand for the NPPA’s addressing service (PayID),” BPAY told the ACCC.
“As a direct result the customer experience of Osko (which was the product created to launch the NPP to consumers), has been confused.
“Financial institutions have struggled to communicate to their customers, turning to the BPAY Group to solve the confused customer experience.”