Erring from the positive sentiment surrounding APT is a...

Erring from the positive sentiment surrounding APT is a dangerous tangent, but during my time holding APT something always troubled me. APT just had it a bit too easy - competition is arriving fast, but it was more on the regulatory side. Afterpay's idea was simply brilliant...in its simplicity. The moment my partner (a serial lay-by shopper who banned herself from credit cards) told me of the scheme I spent 24 hours researching and was on board at $5, constantly re-assessing and even loading up more during the AUSTRAC debate (I feel sorry for those people who went short there and couldn't see APT's behaviour was so far from the blatant disgrace of the banks).

That the RBA forbids credit card companies from barring retailers from passing on their charges (but only their charges, not more, removing excess surcharging in 2016/17) and BNPL providers still do is an unfair market advantage that will not persist. The RBA surprisingly did not remove that advantage in its Nov19 paper, but it did make very clear its long-standing stance in this regard in quite a few areas:

"Merchants face a range of costs when they accept payments. In some cases, merchants might wish to charge a different price to a consumer depending on what type of payment method they use. A surcharge on a particular payment type or types helps the merchant send a signal to a customer that some payment methods are more or less costly for them. Card schemes in the 1990s in Australia had in place ‘no-surcharge’ rules that prevented merchants from doing this. The effect of this was that customers using low-cost payment methods were effectively cross-subsidising the payment choices of customers who elected to pay with high-cost cards. The Bank’s initial reforms required card schemes to remove these ‘no-surcharge’ rules, enabling merchants to pass on the cost of card transactions if they wished, resulting in improvements in price signals to cardholders. The right of merchants to surcharge for expensive payment methods is important for payments system efficiency and helps to hold down the cost of goods and services to consumers generally".

The RBA is clearly proud of the fairness its changes have in the past applied to the market. It also is clearly planning to apply the same fairness in respect of BNPL payments systems (and for all the protests of APT, the RBA quite rightly views them as payment systems):

"The Bank has long been of the view that the right to apply a surcharge on more expensive payment methods plays an important role in signalling the costs of different ways of making payments to consumers. If a business chooses to apply a surcharge to recover the cost of accepting more expensive payment methods, it is able to encourage customers to consider making the payment using a cheaper option. The possibility that a consumer may choose to pay with a lower-cost option when presented with a surcharge also helps put competitive pressure on the pricing policies of payment providers, indirectly lowering merchants’ payments costs. By helping keep merchants’ costs down, the right to apply a surcharge means that businesses can offer a lower total price for goods and services to all of their customers.

"The Bank is interested in stakeholder views on the no-surcharge rules of some BNPL providers. An issue for the Bank is that, unlike card schemes, BNPL providers typically have no-surcharge rules to prevent merchants from recovering the cost of acceptance from consumers via a surcharge.
Accordingly, merchants that accept both cards and BNPL payments are permitted to apply a surcharge to recover the cost of accepting a traditional card payment but are unable to recoup the cost of accepting a more expensive BNPL payment funded by a provider that may receive its repayments
through a debit or credit card. The Bank notes in this regard that it would take a negative view of any arrangements where a currently regulated card scheme used a BNPL structure to try to re-establish no-surcharge rules".

Sorry guys, but regulatory change is clearly coming in Australia (and the UK and EU) and like credit-card companies before them, BNPL's will inevitably have their 'no-surcharge" clauses disabled. Where the provision of credit card charges and surcharges are a little less clear is in the USA, but it would not be unusual for them to follow UK/EU legislation on fintech. I think the market is massively under pricing this inevitability.