Eftpos could ‘cease to exist’ without merger or regulation: expert

An independent expert has warned that Eftpos could cease to exist within a decade unless the country’s three domestic payment organisations are allowed to merge, or regulators take major action.

In a merger that has attracted criticism from some retail groups, BPay, Eftpos and the New Payments Platform Australia (NPPA) are seeking to amalgamate, as the industry deals with digital disruption.

Shareholders of the three payment organisations, which are mainly banks, on Tuesday made a formal application to the Australian Competition and Consumer Commission’s (ACCC). As part of the application, the shareholders also submitted an independent report by payments consultant Lance Blockley, who was commissioned by the applicants’ lawyers.

Mr Blockley argued the merger would create a stronger competitor to the likes of Visa, Mastercard and technology giants eyeing the payments sector such as Google and China’s WeChat. He pointed to a long-term slide in Eftpos’ market share, and said he thought it would be out-competed by the international schemes unless it was part of a “bigger, more robust organisation.”

“In my opinion, without the proposed industry consolidation and in the absence of significant regulatory intervention, the Eftpos domestic debit card payment scheme is likely to cease to exist within the next 10 years,” Mr Blockley said.

Eftpos supports the merger, but does not agree with the prospect that it will be dead in 10 years without the consolidation. The company has announced a series of digital initiatives in recent years in response to innovation in payments, including moves to focus on eCommerce, digital wallets, and the rollout of a payment network based on QR codes.

Eftpos chief executive Stephen Benton said:“For over 35 years, Eftpos has been giving Australian customers and businesses access to reliable, affordable and safe payments. We pride ourselves on offering customers low cost acceptance options and intend to continue to deliver this.”

Shareholders of the payment groups have promised to keep Eftpos, BPAY and NPPA as separate brands, but they say merging the organisations will allow them to bring innovative products to market more quickly.

Retail giants Woolworths and Coles are also shareholders in Eftpos, but some smaller retailers have raised concerns about the merger.

Mark McKenzie, chairman of the Council of Small Business Organisations Australia (COSBOA), highlighted the key role Eftpos had played in challenging major credit cards on their merchant fees. He acknowledged that mergers could bring benefits of scale, but worried the proposed deal would come at the cost of competition from Eftpos.

Jos de Bruin, chief executive of Master Grocers Association, said the group was “very cynical” about what the proposed merger would achieve. He highlighted the slow progress banks had made in cutting merchants’ payment costs by diverting debit card transactions through the Eftpos network.

“We are not convinced this is going to lead to any benefits for small businesses and merchants,” said Mr de Bruin, whose members include IGA, Foodworks and Mitre 10.

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