The Reserve Bank of Australia has revealed the major banks are likely to appoint “more senior” directors to oversee the country’s three domestic payments schemes if the ACCC approves their planned merger.
In a supplementary submission to the ACCC’s review of the proposed merger of NPP Australia, Eftpos and BPay, RBA Assistant Governor Michele Bullock highlighted the benefits of consolidating the three schemes.
“We expect that a consolidated entity would be better able to deal with coordination issues and the challenges that the three schemes currently face in getting industry participants to take decisions to support new products or build new infrastructure,” Bullock told the competition regulator.
“We expect that the directors appointed to the board of the consolidated entity by its shareholders would be more senior than the directors appointed by those shareholders to the current boards of Eftpos and the other two companies.
“We expect that Eftpos in particular would benefit from strategic decision-making involving more senior representatives who have greater ability to support Eftpos initiatives within their own organisations.”
While Bullock said the RBA was “not taking a position” regarding the merits of the merger application, the supplementary submission made no reference to any potential for the union to lessen competition in the payments market.
As the regulator of payments policy in Australia and a foundation shareholder in the New Payments Platform, the RBA has been trying to manage a conflict of interest in its public comments about the domestic payments schemes.
That conflict began to intensify in December 2019 when Governor Philip Lowe mounted an argument for merging the three schemes in a keynote speech to an AusPayNet conference in Sydney.
His comments helped to kickstart a push by NPP Australia and the schemes’ common owners (the four major banks) to engineer a consolidation.
While the Reserve Bank has indicated it will liquidate its interest in NPP Australia if the merger goes ahead, it is not clear whether its investment will be cashed out at cost or at a marked up value if the ACCC approves the deal.
NPP Australia has a lot riding on securing a green light for the deal because it could derail emerging competitive threats from Eftpos and BPay in markets relating to instant payments, digital identity services and QR code-driven payments.
Given these considerations, the RBA might find it considerably easier to offload its stake in NPP Australia at a profit if the merger goes ahead.
The RBA’s conflict has been an issue of concern to a myriad of stakeholders in the payments system, including small business groups campaigning for the retention of Eftpos as a stand-alone scheme and global card schemes such as Visa, which disapprove of payments regulators having skin in the industry they regulate.
“It is equally important that systems and policies are in place to ensure the independence of decision-making and governance through the removal of any conflicts of interest – for example, when regulators also own or operate payments system infrastructure,” Visa told the Treasury review of payments regulation in February.
“Otherwise, there is the risk of disrupting the level playing field within the payments system.”
Industry concern with the RBA’s conflict of interest might help explain the ACCC’s unusual move on Friday to publish a detailed file note of a meeting it held with RBA officials on 24 June about the proposed merger.
The meeting, which was attended by Bullock, the head of the RBA’s payments department Tony Richards and 11 ACCC executives and staff, was mostly focused on the strategic position of Eftpos’ payments services.
The competition regulator has not published any file notes or records of meetings held with other stakeholders since the merger review started in March.
The ACCC did not explain why it voluntarily published the file note but the likely reason was to demonstrate transparency with industry stakeholders about its dealings with a fellow regulator managing a conflict of interest.