Scheme fee increases and higher transaction volumes flowing from the introduction of least cost routing helped Eftpos Australia to more than double its bottom line earnings last financial year.
Eftpos posted a net profit of A$10.7 million for the 12 months to the end of June – a 130 per cent increase on the 2019 result of $4.6 million.
After seven years of losing business to Visa and Mastercard, the domestically owned debit payments scheme began to retrieve market share in 2020.
Eftpos increased its transaction volumes by 13.3 per cent during the year, despite the stymieing effects of the global pandemic.
Before Covid-19 triggered shutdowns across Australia in March, the company had been tracking to boost transaction volumes by almost 18 per cent.
Chief executive Stephen Benton described 2020 as a strategic turning point for the company.
“Encouragingly this growth halts the previous trends of declining volume and market share experienced across several years, marking a turning point as Eftpos transitions into a new era,” he told shareholders and merchants in the annual report.
“Our transaction volume growth over the past year was fuelled by the expansion of merchant routing volumes, broadening areas of acceptance, increased number of cards and the enablement of members’ proprietary cards with contactless capability.”
Chairman Leigh Clapham acknowledged the move initiated by NPP Australia to negotiate a mega-merger of the country’s domestic payments schemes.
However, the wording of his disclosure had a mundane timbre.
“The payments industry is consulting with respect to a possible consolidation of payments capability across domestic payments providers and whilst the result is unknown as at the date of this report and in any event confidential to the participants in the consultation, may have some impact on the future operations and/or state of affairs of Eftpos,” Clapham told shareholders in the annual report.
Eftpos appears to be entering an earnings sweet spot in the next few years with transaction volumes set to escalate as least cost routing(LCR) is rolled out by the four major banks.
The banks are under pressure to deliver the capability to small merchants who stand to harvest savings on the fees they incur for accepting contactless debit payments.
According to the Reserve Bank, Eftpos remains the cheapest processor of contactless payments in Australia and therefore is in line to win more business as banks popularise LCR services.
The company is also expanding into new theatres of competition such as card not present processing and digital identity verification.
With NPP Australia and BPAY struggling to grow profitability, the attractions for Eftpos of entering a three-way merger are hard to discern.
Nor have any such benefits been articulated and quantified by merger proponents.The recent acquisition of the BeemIt live payments platform also presents a potentially significant obstacle to the execution of a merger in terms of Eftpos’ business strategy and payments competition.
BeemIt’s digital wallet is a strategic play for Eftpos.
But BeemIt’s current business case also positions it as a competitor to the NPP.
Would the Australian Competition and Consumer Commission be inclined to wave through a merger of BeemIt and the NPP because the four