MGA TMA voices concern over proposed payments platform merger

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MGA TMA has been advocating the Federal Government and Regulators for many years for a fairer merchant fee payment scheme, Least Cost Routing, citing the current payment transaction fees imposed upon members by banks and the global card companies have become an unsustainable business cost. George Lekakis is a banking journalist who makes the following observations concerning a recent announcement involving the merger of 3 payment vehicles.

Small business groups have responded to the proposed merger of Eftpos, National Payment Platform (NPP) and BPay with “cynicism” and “concern”, saying they fear it has potential to remove competitive tension in the payments market.

An industry committee set up by NPP Australia earlier this year announced in late December 2020 that the shareholders of the merger candidates unanimously supported a three-way union and would be seeking regulatory clearance from the Australian Competition and Consumer Commission in 2021.

The merger involves the creation of a single 13-member board to oversee the three payments schemes, with any key decisions on the future of each scheme to be subject to the approval of the shareholders that use each particular system.

While Coles and Woolworths are shareholders in Eftpos and the Reserve Bank is a part-owner of NPP Australia, the four major banks – NAB, CBA, ANZ and Westpac – collectively control each of the businesses. Mark McKenzie, the chair of the peak national small business council, COSBOA, said his organisation had campaigned for many years for least cost routing (LCR) in the contactless debit payments market and was worried that the merger could undermine Eftpos role as a source of price tension.

He described the proposed governance structure for the merged entity as messy and bizarre.

“Our principal concern is that there could be a loss of competitive tension in the payments market resulting from the merger,” he said.

“It’s a bizarre corporate structure with the three companies operating under one board.

“How does the board ensure there is no cannibalisation of one payments method by another?”

The chair of the industry committee – Payments Council kingpin Robert Milliner – believes the merger will unlock “incredible value”. “Eftpos, BPay Group and the NPPA provide Australians with reliable, safe and affordable payments options every single day,” he said.

“Working together towards common goals, they can unlock incredible value, invest more in innovation and realise cost savings that will ultimately benefit the Australian public.”

However, small business leaders and payments experts questioned whether Milliner and the banks could guarantee any alleged benefits would flow to independent retailers and consumers.

For almost three years the four major banks have resisted pressure from regulators to accelerate their LCR rollouts, which has denied thousands of merchants the opportunity to direct contactless debit transactions to the lowcost Eftpos network.

The banks stand to lose up to A$550 million a year in merchant fee revenue from offering Least Cost Routing, and their laggard rollouts have created mistrust among small business groups.

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“I am a bit cynical about this merger proposal,” admits Jos de Bruin, chief executive of the Master Grocers Australia / Timber Merc.

“We’ve always tried to help drive down the fees that independent grocers incur for accepting contactless and other types of payment.

“Unfortunately, the major banks have been too slow to roll out Least Cost Routing.”

McKenzie and de Bruin said they each had received letters from Milliner to discuss the effects of the merger.

Noting Milliner’s involvement in the Business Council of Australia – the national lobby group for corporate Australia – de Bruin questioned why small business representatives had not been consulted earlier in the process.

“The BCA has never been friends of small business, really,” he said.

McKenzie is also concerned that the merger risks upending the potential for each of the schemes to evolve new businesses through digital innovation and thereby boost competition in the payments sector.

“This proposal takes each of them out in one fell swoop – they’re not going to behave like separate product providers, and they’re not going to be led by different products,” he said.

“It’s a triple jeopardy risk.”

Grant Halverson, a payments consultant and former managing director of Diners’ Club Australia, said he did not believe the proposed governance arrangements for the combined entity were tenable.

“How the hell does one board expect to manage three different payment businesses with three different CEOs and inconsistent shareholders?” he said.

“Put simply; the governance arrangements don’t pass the pub test.”

Jeff Rogut, a longstanding campaigner for transparent pricing in the payments sector who advises small businesses on reducing their costs of acceptance, said he was concerned the merger would constrain Eftpos’ ability to deliver further savings to independent merchants.

“I’m not sure independent retailers were given any say in the development of the merger proposal,” he said.“Eftpos has been terrific for small businesses in Australia, but there are too many vested interests in the payments sector as a whole and in this merger.”

Source: George Lekakis, Associate Editor, Banking Day