Pay partners in merger pitch

Parties to a proposed merger of BPAY, Eftpos and the New Payments Platform are bracing for opposition to the deal as they try to convince regulators of its merits.

ACCC chairman Rod Sims. Picture: AAP

Parties to a proposed three-way merger of BPAY, Eftpos and the New Payments Platform have put forward arguments to the competition regulator for approval of the marriage as they brace for potential opposition to the deal.

Shareholders and members of the three payments entities made a formal application to the Australian Competition & Consumer Commission on Tuesday. They argue the tie-up doesn’t impinge on market dynamics or lessen competition.

Shareholders of the entities include major banks, Coles and Woolworths.

The proposed deal was outlined in 2020 and the parties want the landmark transaction sealed in the second half of 2021.

The ACCC has about five days to conduct validity checks ahead of engaging with the parties and accepting industry submissions.

There is expected to be some opposition to the mooted transaction from retailers and other groups concerned about the deal weighing on competitive forces in the payments market.

Committee chairman Robert Milliner said the three entities looked forward to working with the ACCC to explain “the benefits” of a combined player that could better compete with card giants Visa and Mastercard.

“For example, the industry committee process established to consider the potential amalgamation resulted in agreement to accelerate the rollout of Eftpos online, should the ACCC authorise the amalgamation, giving merchants access to lower cost payment options online,” he added.

Reserve Bank governor Philip Lowe last year said the merger of BPAY, Eftpos and the NPP could help solve “co-ordination problems” between them, but there were concerns about a reduction in competition and innovation.

“It’s really up to the industry and ACCC to balance those two things,” he said.

The ACCC merger application was accompanied by an independent report authored by payments expert Lance Blockley, managing director of The Initiatives Group.

He said there was currently “little competition” between the NPP, BPAY and Eftpos payment methods, as they were used for different transaction types.

“NPP and Eftpos do have plans to gain market share at point of sale, with Eftpos usage expanding into online merchants and NPP participants potentially deploying solutions both online and at physical POS. But their main competition will not be each other; it will be Mastercard and Visa … and potential new international entrants such as Alipay, WeChat Pay and Google.”

Mr Blockley said if the three-way merger didn’t go ahead — and there wasn’t any regulatory intervention — the Eftpos domestic debit card payment scheme would probably cease to exist within the next decade, given the take-up of mobile wallets and other online methods.

“The lack of a domestic debit card scheme in Australia could be viewed as creating both a sovereign risk and a pricing risk,” he said.

A document lodged by law firm King & Wood Mallesons said the new merged entity — referred to as NewCo — would be owned by the current shareholders and members of BPAY Holdco, Eftpos and NPP. It said while the RBA was currently an NPP shareholder, it would not be a NewCo shareholder.

The document identified potential benefits from the merger including synergies, improved ownership interests of smaller participants, and better engagement with small businesses and other participants in the payment ecosystem. “Any potential detriments are expected to be avoided as a result of the checks and balances,” it said.