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Summary
- Australia's Payments System Board yet to reach any conclusion on retail payments regulations.
- RBA Governor Philip Lowe said that the board doesn’t see a strong case for a significant revision of the interchange framework.
- It’s unlikely that BNPL operators may be asked to remove their no-surcharge rules as of now.
Reserve Bank of Australia (RBA) Governor Philip Lowe on Monday said that the periodic review of retail payments regulations has been resumed by Australia's Payments System Board. The review was earlier put on hold during the COVID-19 pandemic.
Three key issues to be focused upon will be interchange fee regulation, buy now pay later (BNPL) no-surcharge rules and dual-network debit cards and least-cost routing.
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Speaking at Australian Payments Network event held in Sydney, Mr Lowe said that the board is still to reach any final conclusion with respect to the issue and the RBA staff will meet the industry participants during the coming months. On the issue of BNPL providers and transaction fees, Mr Lowe said that the board doesn’t see a strong case for carrying out significant revision in the interchange framework in Australia.
READ MORE: How are ASX- listed BNPL stocks positioned to enter 2021?
The BNPL operators, so far, have not reached the point where it could be said that the costs arising from the no-surcharge rule exceed likely benefits in terms of innovation, as per board’s preliminary view, Mr Lowe said. So, it’s unlikely to conclude that these operators should be asked to remove their no-surcharge rules as of now, he added.
Image Source: © Kalkine Group 2020
Some of the leading BNPL companies listed on ASX saw their share price react to the news, Afterpay limited (ASX:APT) was up 1.4%, Zip Co Limited (ASX:Z1P) up 0.89%, while Sezzle Inc (ASX:SZL) and Splitit Payments Ltd(ASX:SPT) shares were down by 1.17% and 3.97% respectively (as on 7 December 2020, AEDT 12:18PM).
Elaborating further RBA Governor said that even the largest players in the BNPL segment in Australia just account for a small proportion of total customer payments in the country, despite clocking in brisk growth. Several new businesses have also emerged of late including the ones that facilitate payments making use of virtual cards under the designated card schemes which are subject to a surcharging framework.
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Mr Lowe also said that a rise in the number of BNPL providers is leading to competitive pressure which may reduce pressure on merchant costs. There is a possibility that a public policy case may emerge for the removal of no-surcharge rules in at least some of the BNPL arrangements over time, according to the board, Mr Lowe said.
