Competition regulator the ACCC has agreed to the proposed merger of BPAY Group Holding with eftpos Payments Australia, and NPP Australia (NPPA) in one of the most eagerly anticipated decisions for Australian fintech.
ACCC Chair Rod Sims said they found that, at a high level, the services of the three companies do not compete closely.
“We do not consider that the merger of these parties will substantially lessen competition in any payments market, after taking into account the court-enforceable undertaking.”
Least cost routing is the ability for merchants to choose whether payments made using eftpos/Visa or eftpos/Mastercard denominated dual network debit cards, are processed by eftpos; or by the credit card duopoly, which affects the fees the merchant pays.
“eftpos is important to the availability of least cost routing, as the only current alternative network to the Visa and Mastercard networks through which debit transactions can be routed,” Sims said.
The four major banks are majority shareholders in eftpos, BPAY and NPPA. The new company will called Australian Payments Plus (AP+) and the big four will continue to hold a majority stake in AP+. The other shareholders include ASL, Bendigo and Adelaide Bank, Cuscal, Tyro, Coles and Woolworths, Macquarie Bank, HSBC Bank Australia and Fiserv.
All three will continue as distinct brands and operations, but will work together under a single board to collaborate on new products and capabilities.
AP+’s inaugural chair, Catherine Brenner, said she was now in the process of recruiting the remaining three independent Directors to the 13 person AP+ board alongside the nine directors representing the shareholders, including the four major banks, other ADIs and non-ADIs.
“Today marks the start of BPAY, eftpos and NPPA working together to form AP+. Over the coming months, the three entities will complete a number of corporate restructuring steps, including transitioning to a single Board structure,” she said.
“This includes the three entities moving into the same premises and establishing working groups for staff to share ideas and work streams. The transition to the single Board structure is expected to be complete by Christmas.”
Brenner said they will establish the end user committee that represents the views of consumers, small businesses, industry associations, charities, corporations, fintechs and government departments.
“The Committee will be chaired by one of the Independent Board Directors. We will work to ensure that this diverse range of stakeholders are considered and represented in the Board’s decision-making about how to allocate resources and investment,” she said.
An era of rapid change
Rod Sims said the ACCC recognised that the payments sector was experiencing rapid change and the RBA will continue to safeguard the availability of least cost routing.
The ACCC found that competition between the payment services of eftpos, BPAY and NPPA is marginal, because their core payment services are for different uses and are largely complementary. Nonetheless, the regulator concluded the deal will soften competition between the three entities in terms of expansion beyond their core offerings, although Visa and Mastercard remain strong competitors,
The three companies have also committed to an industry wide standard supporting payment with QR codes by June 2022, in coordination with the Australian Payments Network, the industry association for payments.
Sims said that in the undertaking accepted by the ACCC, the merger companies have also agreed that for four years, eftpos will do all it can to make least cost routing available and promote it, and ensure the eftpos payments scheme and the eftpos card-based issuing and acceptance infrastructure and services are maintained.
“We accepted the undertaking because we consider it will help ensure that eftpos will develop and improve its debit-based payment services for point of sale, online and in-app payments,” he said.
The ACCC added that the banks have an influential role in deciding what payment services to implement, and would be reluctant to support multiple and overlapping payment service initiatives with or without the merger.
“The merger will enable the three payment schemes to coordinate investment proposals and avoid inefficient duplicative spending. Importantly, this will increase the likelihood of the major banks and other shareholders investing in domestic payment services,” Sims said.
An executive summary of the ACCC’s determination is available here. The full determination will be published later today.
“We also hope this will create greater access for fintechs to the payment rails, enabling more innovation and greater collaboration.”