RBA sees cause for concern as mobile payments boom

Financial regulators have warned they could scrutinise the fast-growing mobile payments system as key players hit out at high fees levelled by Apple and Google.

The fast-growing mobile payments system is under scrutiny. Picture: David Mariuz

Australia’s financial regulators have warned they could scrutinise the growing mobile payments ecosystem as industry figures decry high fees levelled by Apple and Google.

On Monday parliament kicked off the first of three days of hearings on the growing mobile payments system after a significant growth on the back of the Covid-19 pandemic.

Speaking at a Parliamentary Joint Committee on Corporations and Financial Services, members of the Reserve Bank said “there could be a case before long” for a review of mobile payments.

But RBA head of payments policy Anthony Richards said the bank would be constrained by current regulatory powers that do not extend to cover mobile payments.

“If we thought there were major issues here, we would for the time being, have to go to the ACCC,” he said.

“But we’re indicating that it’s very much a live issue and it could be a case before too long.”

In its submission the RBA said it was worth considering “fees and other arrangements associated with digital wallets” and whether the requirement that sees card providers disclose fees be extended to cover mobile payments providers.

Mr Richards quashed suggestions cryptocurrencies would have a role to play in the future of Australia’s payments landscape.

“The bank has been closely watching cryptocurrencies since 2013, we just don’t see them as a method of payment in Australia,” he said.

“They’re highly speculative. They’re not backed by anything.”

The committee also heard from Zip Co co-founder Peter Gray, who noted his company’s payments model was facilitated through a mobile payments app without using the same chip technology used in many payments apps.

Reserve Bank of Australia head of payments policy Anthony Richards.

He said those calling for intervention in the mobile space needed to explain “what is the harm that regulatory intervention seeks to address”.

The fast growing buy now pay later platforms have been cautious as the RBA considers whether to block terms of use that prevent merchants passing on fees imposed by the platforms.

Mr Gray said Zip charged merchants fees of 1.5 to 5 per cent of a transaction.

“We have a fee that’s charged to a merchant to provide our services to them, those fees are fair,” he said.

Mr Gray noted that some banks were advising Zip users to close their accounts to qualify for a home loan.

“It’s clearly because they’re concerned about the level of engagement our service has with that younger generation,” he said.

The inquiry comes after the European Commission, which proposes and enforces transnational laws and standards in the European Union, launched formal antitrust investigations into a number of Apple’s practices around payments through iPhones.

The Commission is investigating whether Apple is excluding competitors by restricting access to the chip in iPhones that facilitates mobile payments.

Epic Games, which is engaged in a court fight over fees on mobile payments, in its submission to the committee launched a spray at Apple and Google for charging 30 per cent commissions on purchases.

Eftpos Payments Australia CEO Stephen Benton.

“The contractual restrictions imposed by each of Apple and Google prevent would-be competing app distributors from developing viable and compatible app marketplaces that would provide consumers and app developers with choice beyond the Apple App Store and Google Play Store,” Epic said.

“Notably, the systems offered by Apple and Google do not provide any unique benefits over other in-app payment services or existing alternative (and lower-cost) options that offer similar functionality.”

Representatives of Eftpos and subsidiary Beam It also expressed concern about the mobile payments system which they said was seeing transactions not routed through “least cost routes” as is the case with most debit card transactions.

Eftpos Payments Australia CEO Stephen Benton said the shift by some banks to offer only one payment system through cards was worsening the cost issue.

“Up to 50 per cent of debit card transactions will be on mobile by the end of this year. However, mobile transactions have not been updated to allow for lowest cost routing,” he said.

Apple and Google said fees on the system were not an issue.

In its written submission Apple noted it “charges a small and transparent fee to the banks” of between 15-30 per cent commission on transactions.

“Many platforms also charge users a service fee for payments on top of their commissions, while Apple does not. In addition, the App Store Small Business Program benefits the vast majority of developers who sell digital goods and services on the store, providing them with a reduced commission of 15 per cent on paid apps and in-app purchases,” Apple said.

Google director government affairs and public policy AU & NZ Lucinda Longcraft said, unlike Apple, the move to freely open access to mobile payments on Android allowed competition to flourish.

“We believe the mobile payment and digital wallet landscape in Australia is competitive.”