Mallesons partner Scott Farrell
Scott Farrell’s standing as a RegTech lawyer in the Australian financial services industry is probably unmatched at the moment.
The partner from King & Wood Malleson’s fintech legal practice yesterday landed another gig running a top level government review, this time as chair of the Treasury inquiry into governance and regulatory arrangements within the payments system.
Farrell has already made a big impact on the financial services landscape in recent years after chairing the government’s two open banking inquiries.
There is a lot riding on the findings of Farrell’s latest inquiry because they are likely to help reshape the Morrison Government’s policy agenda for not only payments regulation, but also its approach to competition and innovation.
A widely-held view among payments experts is that Farrell is a champion of the overhaul of the UK payments system in the last decade and is likely to model his recommendations in line with those reforms.
A focus of Farrell’s latest inquiry will be on the governance and access arrangements for digital infrastructure operated by one of his law firm’s longstanding clients - New Payments Platform Australia Ltd.
There is probably no-one outside of the board and senior management of NPP Australia who understands the organisation’s structure and governance better than Farrell.
According to the independent legal research firm, Chambers & Partners, Farrell advised the Australian Payments Network on the establishment of the NPP and the special purpose entity which is responsible for it.
Moreover, KWM helped to author the NPP’s constitution in 2014 and has been involved in updating the document in the years since.
Chambers & Partners also lists NPP Australia among the “significant clients” of KWM’s Sydney-based fintech practice.
While KWM’s work for NPP Australia has given Farrell a unique perspective into its governance that will be valuable for the review he is about to conduct, it might also create the perception of a potential conflict of interest among some businesses invested in, or exposed to, the payments system.
Any such concerns would also have to be balanced against the fact that KWM’s fintech practice also counts Fintech Australia as a client.
That’s important because Fintech Australia has been advancing arguments for reform of the NPP’s access regime to support the entry of new players in the payments system.
The inquiry’s terms of reference make it clear that Farrell will be required to scrutinise the current access arrangements, which the Productivity Commission said in 2018 require “more transparency and rigour” to avoid restricting competition.
Payments experts are mostly scathing in their criticism of the current access regime.
Grant Halverson, the principal of payments consultancy McLean Roche, believes the access arrangements require urgent and wholesale reform.
“The NPP has a massively flawed access regime that will enshrine the big bank oligopoly if it is not fixed,” he said.
"As it currently stands the NPP is not a solution to anything because it accounts for only a small portion of total payments.”
Retail groups are also waiting to see whether the Treasury review will examine the merits or otherwise of NPP Australia’s plan to merge its operations with those of BPay and Eftpos Australia.
While Banking Day understands that the country’s four major banks are eager to see the three-way merger materialise, small business advocates and retail groups are horrified by the prospect.
The Australasian Association of Convenience Stores warned last week that the proposed merger would reduce competition in the payments market and help to consolidate the power of the four major banks.
“As a general rule, whenever the major banks have an agenda to merge entities to streamline processes, alarm bells warning of the impacts on competition should sound,” said the association’s chief executive Jeff Rogut.
Rogut has championed the launch of least cost routing in Australia, which allows retailers to lower their costs of accepting contactless debit payments by directing transactions to Eftpos Australia’s low-cost processing network.
The major banks have begun rolling out least cost routing to some businesses after coming under pressure from the government and regulators.
However, the banks have been slow to offer the service because it promises to reduce the fees they collect from automatically directing transactions to Visa and Mastercard.