The committee behind the slated merger of BPAY, eftpos and the New Payments Platform (NPP) is trying to appease concerns among small business groups that the proposed amalgamation would result in negative changes to eftpos services or higher merchant fees.
The Industry Committee, which was established to lead the three-way merger, includes 13 shareholders from BPAY, eftpos and the NPP, including the big four banks, Coles, Woolworths, Cuscal, Tyro, Bendigo Bank, ASL, Fiserv, Macquarie Bank and HSBC.
Ahead of the committee’s proposal to the competition regulator, its members agreed that if approved, the merger would see BPAY, eftpos and NPP maintained as single entities but led by a single board, under the name NewCo. The rationale was that this would help make payments services in Australia more efficient and competitive with international card schemes.
Robert Milliner, chair of the Industry Committee, says the main objective of the merger is to ensure eftpos remains viable, and services across the three domestic payment platforms continue to improve.
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“Our view is that eftpos’ viability absent this merger is much more questionable into the medium term than it would be with the support of everybody behind it,” Milliner tells SmartCompany.
Small business groups are concerned the merger would lead to less competition in Australia’s domestic payment landscape and potentially result in poorer quality services for businesses.
However, Milliner disputes this view, saying the merger doesn’t include a plan to reduce the services available from eftpos, BPAY and the NPP, which are distinct and don’t compete with one another.
“We continue to believe that the three services are not competitive, and that they are not competing with each other for fundamental services,” he says.
“You use eftpos to do things in store, you use BPAY to pay your tax bill, and you use NPP to do high speed, high volume transactions for corporates and large players.”
There are long-term benefits in having a unified entity help the three payment platforms stay up to speed with changing regulation and technology, Milliner argues.
The committee has also created a roadmap of additional eftpos, BPAY and NPP services to be rolled out by 2022 should the merger go ahead.
“It allows us then to have one organisation to deal with future services like payments by QR codes and the development of digital identity,” he says.
The issue of least cost routing
Small business groups are also concerned the merger would lead banks to neglect least cost routing, resulting in higher merchant fees for some transactions.
Least cost routing allows businesses to choose which networks tap-and-go payments are sent through on debit cards, allowing businesses to opt for the network that charges the lowest fees. It can reduce transaction costs for businesses by as much as 40%.
In its submission to the Australian Competition and Consumer Commission’s merger review, the Council of Small Business Organisations (COSBOA) urged the regulator to reject the proposal because it would not encourage access to least cost routing.
“The profit motivation of the banks will not change, so implementing a less profitable initiative, like LCR remains highly unlikely,” COSBOA chief executive Peter Strong wrote at the time.
But members of the industry committee leading the merger and eftpos say this argument is misguided. They argue the merger wouldn’t result in a change of the provision of least cost routing services.
Stephen Benton, chief executive of eftpos Australia, said least cost routing is aligned with eftpos’ strategy, and is an important source of volume and revenue growth for eftpos transactions.
“The proposed consolidation holding company NewCo has been set up with a purpose of delivering low cost payments,” Benton wrote in a letter to Strong.
“It is therefore my expectation that should industry consolidation occur both eftpos and NewCo will continue to be focused on low costs and indeed continue to be more competitive in terms of price and value adds around the payment experience,” he added.
The ACCC is currently considering the proposed amalgamation of BPAY, eftpos and the NPP under the single entity NewCo and will make its determination in July.