A global conference of debit system providers in Spain next month is set to highlight several market access issues that should pique the interest of the Australian Competition and Consumer Commission.
The conference will be attended by Eftpos Australia’s boss Stephen Benton, and Mark O’Connell, chief executive of Canada’s debit system provider, Interac.
In the last 12 months both Eftpos and Interac have found themselves shut out of digital revenue collection systems that are being developed for the respective public transport networks of Sydney and Vancouver.
Governments around the world are moving to introduce so-called “open loop” payments systems that allow commuters to pay fares directly with personal debit and credit cards without being forced to purchase proprietary stored value cards such as Opal (Sydney transit card) or the Go Card (Brisbane).
A priority for governments in many large cities is to fast-track the introduction of tap and go payments to reduce card-reloading queues and to generally improve the convenience of paying fares for commuters.
However, the meaning of the word “open” is being tested in many of these public transport markets, with debit system providers such as Eftpos and Interac discovering that governments are electing to launch new systems for contactless payments that effectively block their right to compete against the likes of Mastercard and Visa.
In Vancouver, a new contactless system was launched in May that allowed commuters to tap readers using only Visa or Mastercard credit cards.
Metro Vancouver described the new system as “open” even though it did not accommodate American Express cardholders or people who prefer to use Interac-enabled debit cards.
Eftpos is also meeting resistance from the NSW and Queensland governments to begin testing its software on the new contactless platforms now under development in Sydney and Brisbane.
Both governments have commissioned a Californian company, Cubic Corporation, to build the new payments platforms for the transport systems in their capital cities.
Cubic is one of the leading fare collection system developers in the world and is involved in the rollout of contactless payments in many city markets, including Vancouver.
Despite florid announcements from transport ministers in NSW and Queensland that their governments are building “open” and more convenient ways for metropolitan transport users to pay fares, neither has given guarantees that commuters will be able to tap an Eftpos debit card to get on a train or bus.
Under competition agreements entered into by these state governments, they are required to ensure their new platforms are not built in ways that make market entry unreasonably difficult for some payments providers and easier for others.
That would be tantamount to engineering market outcomes through contrivance rather than consumer choice driven by genuine competition.
The new digital payments platforms being developed and rolled out in Queensland and NSW should adhere to principles of competitive neutrality from the day they begin operating, rather than hand early mover advantages to payments providers who have been “partnering” with state governments on pilots and the early development of platforms.
This consideration should have been a priority for each of the governments in the mandates given to the private developer of the new fare collection systems.
That Eftpos Australia was an afterthought in the engineering of the new platforms raises potentially serious questions under national competition laws about the conduct of both governments.
Rather than treating Eftpos as a secondary consideration, the NSW and Queensland governments should be making concerted efforts to ensure the company’s services are embedded in the new system.
Eftpos is the cheapest processor of contactless payments in the country by a long margin, according to official data collated by the Reserve Bank’s Payments System Board.
To stall its entry into an allegedly open payments system only serves to institutionalise higher transaction costs for transport users.
A sign of Eftpos Australia’s alienation from the development of the new platforms emerged on Tuesday when the company released the findings of a survey it commissioned on the payments preferences of 1500 public transport users.
The findings were barely a surprise: 80 per cent of respondents said they wanted state governments to operate open payments systems, which allowed them to pay using their preferred method.
It is a sad reflection on the NSW and Queensland governments that one of Australia’s largest payments businesses felt compelled to commission such research simply to support its right to compete in the contactless payments.
Actually, it’s much worse than sad.
Shameful and pathetic are more appropriate descriptors.
It’s high time for the national competition regulator to ask the governments of NSW and Queensland what is their interest in limiting competition in contactless payments?