Payments competition concerns raised over Eftpos' proposed merger with NPPA and BPay

The ACCC is seeking views on a court enforceable undertaking which has been offered by three Australian payment services providers seeking to merge.

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The Australian Competition and Consumer Commission (ACCC) is concerned the proposed merger of Eftpos with BPay and New Payments Platform Australia may impact payments competition.

Eftpos, BPay, and NPPA announced plans in December to amalgamate. Eftpos operates a network of payment terminals, Bpay is an electronic bill payments system, while NPPA is the company charged with the oversight of all of the transactions moving through Australia's updated payments system, the NPP. If approval to merge is granted, the company will emerge as Australian Payments Plus Ltd, or AP+.

In March, Industry Committee Administration Pty Ltd (ICA), the company representing the three providers, applied to the ACCC for authorisation to merge. The ACCC is now seeking views on the proposed undertaking [PDF] offered by ICA.

The proposed undertaking seeks to address concerns by industry participants that the proposed merger could result in a reduction in investment and support for Eftpos, and a decrease in the availability of least-cost routing (LCR).

LCR is an initiative aimed at promoting competition in the debit card market and helping to reduce payment costs in the economy.

When a customer makes a contactless "tap-and-go" payment with their dual-network debit card -- not credit cards, however -- the merchant may choose to send the transaction via the debit network that costs them the least to accept. If the merchant chooses not to route, the transaction is instead sent via the default network which is programmed on the card, typically the Debit Mastercard or Visa Debit network.

"Eftpos plays an important role in maintaining competition in the routing of debit card payments, which are an important part of Australia's payment landscape," ACCC chair Rod Sims said on Friday.

"We are interested in the views of merchants and other industry participants on how this undertaking would impact competition in payment services."

According to the ACCC, the proposed undertaking includes obligations that AP+ will ensure that Eftpos will do everything in its control to make LCR available for three years and ensure the Eftpos payments scheme and the Eftpos card-based issuing and acceptance infrastructure and services are maintained for three years.

It also seeks to ensure that Eftpos and NPPA develop and make available a set of prescribed services within agreed timeframes; and ensure that BPAY, Eftpos, and NPPA agree an industry wide standard supporting payment with QR codes by the end of June 2022.

AP+ will also submit a report to the ACCC every six months to demonstrate its compliance.

"The obligations in the undertaking are intended to help ensure that Eftpos will develop and improve its debit-based payment services for point of sale, online and in-app payments, and person-to-person payments," Sims added.

Earlier this year, the ACCC sought submissions on the proposed merger. In its statement of preliminary views [PDF], the ACCC said it was not satisfied that the proposed amalgamation will not result in a substantial lessening of competition in a market or markets relating to payments services or infrastructure.

"The ACCC's preliminary view is that the proposed amalgamation is likely to result in some of the claimed public benefits, but the extent and significance of those claimed public benefits is unclear," it wrote.

Visa submitted [PDF] that without appropriate governance systems, the new organisation may be incentivised to favour outcomes of key shareholders at the expense of smaller business groups and other competitors. While Mastercard expressed concern [PDF] that under the proposed structure of the new company, the major banks may be able to act in concert and Mastercard recommended that conditions be imposed to maintain separation and independence of the amalgamated entities.

The Australian Banking Association, however, considers the proposed amalgamation would not substantially lessen competition between BPAY, Eftpos, and NPPA, because their products are not close substitutes for each other.

"Instead, the proposed amalgamation will enhance the ability of NewCo to compete with international card schemes and payments services offered by big tech," it wrote [PDF].

The Reserve Bank of Australia said [PDF] it was not taking a position regarding the merits of the proposal before the ACCC.

Eftpos in November acquired Beem It from the Commonwealth Bank of Australia, the National Australia Bank, and Westpac.

The ACCC is seeking submissions on the proposed undertaking until 17 August 2012.

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