The committee overseeing the merger of eftpos, BPAY and NPP Australia (NPPA) has sought to allay fears of a monopoly ahead of a final regulatory decision later this month, arguing that the amalgamation will instead boost competition.
Responding to the Australian Competition and Consumer Commission’s preliminary views on the proposed merger on Wednesday, the Payments Industry Committee said there would be “no substantial lessening of competition”.
In a report [pdf] released last month, 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 benefit, but the extent and significance of those claimed public benefits is unclear,” it said, adding that further information was needed.
But the committee – which is comprised of 13 mutual shareholders and members of the three payments infrastructure providers, including the big four banks – has argued that the “three schemes do not currently compete with each other across payments infrastructure”.
It cites independent economic analysis prepared by Charles River Associates vice president Geoff Edwards [pdf] that suggests “any loss of competition would be marginal at worst”, with some overlaps likely to remain even after amalgamation.
Edwards’ report is critical of the ACCC’s preliminary views, which he said “does not contain a similar analysis or comment on or advance beyond my analysis”, making it difficult to progress the discussion.
Industry Committee chairman Robert Milliner said the merger sought to improve competition by allowing the payments infrastructure providers to better complete with overseas payment platforms.
“An efficient merged entity will be better able to compete against the international card schemes who currently dominate the market,” he said in a statement released on Wednesday.
“Visa and Mastercard have revenues of US$21 billion and US$15 billion respectively. This compares to eftpos, BPAY Group and NPP who all have annual revenues of less than $75 million.”
Milliner added that having a single Board would also allow the merged company to accelerate the development of new payments solutions, with investments in payments innovations currently stifled by the existing structure.
The committee has similarly assured the ACCC and other interest parties that eftpos would be “preserved and strengthened so that it remains a source of competitive pricing tension against international card schemes and big tech entrants”.
Under the proposed structure of the merged entity, tentatively called ‘NewCo’, eftpos, BPAY and NPPA are expected to be “preserved as distinct operations”, each with their own “operating governance and management schemes”.
“eftpos is very supportive of the proposed amalgamation and looks forward to realising the benefits of being more competitive in terms of price and value adds around the payment experience,” eftpos CEO Stephen Benton said.
The committee also said least cost routing would “not be impacted” by the merger, but noted that a “more efficient and competitive domestic scheme” was needed to ensure eftpos can enforce the rollout.
“The applicants are very aware of the importance of least cost routing (LCR) to merchants and small businesses and are supportive of the continued rollout of LCR, which they will continue to do through discussions with their merchants,” the committee said.
Australia’s peak body for small business, the Council of Small Business Organisations of Australia (COSBOA), has warned the merger could lead to increased costs, with CEO Peter Strong likening it to the “formation of a monopoly”.
The ACCC is expected to hand down its final decision on the merger on July 31.