Australia’s Treasurer released the long anticipated Productivity Commission Final Report into Competition in the Financial System. This report, weighing in at an impressive nearly 700 pages, builds on David Murray’s Financial System Inquiry (FSI) and Wallis Inquiry.

The report goes into various elements of the system including whether there has been an appropriate balance between competition and stability in banking, which has entrenched the market dominance of the four major banks in Australia. The report strongly supports greater competition, transparency, better choices and empowering consumers across a broad range of initiatives, products and customer segments.

For the payments system, the PC observes that the system “is at a critical turning point” and recommends that:

• The regulator (Payments System Board) should ban interchange fees by the end of 2019. All other fees should be made transparent and published. 
• The Competition regulator (ACCC) should investigate whether interchange fee regulation favours three-party card schemes, and if distortion exists, whether it is significant enough to require further regulatory intervention. 
• Merchants should be given the capacity to select the default route that is to be used for payments by dual network cards. 
• By the end of 2019, the ACCC should investigate what additional disclosure methods could be used to improve consumer understanding of fees for foreign transactions. 
• There needs to be a review of the regulation of Purchased Payment Facilities (such as Paypal) and to simplify the regime. 
• The Government should make the ePayments Code mandatory (which sets out basic rules for who pays for unauthorised transactions and establishes a regime for recovering unauthorised payments). 
• That the New Payments Platform (NPP) be subject to an access regime to ensure that there continues to be competition for new entrants to join in; and 
• Investigating ways for the NPP to promote competition, such as additional functionality for PayID to give customers the ability to send/receive bank transfers and other payments. 

The Government will await the final report of the Royal Commission before they definitively respond to the PC (i.e. after February 2019).

While the Government’s response is some period away, PCN recommends that payments organisations should consider the business impact associated with the adoption of these recommendations, as well as integrating your public affairs advocacy to ensure the right business outcomes.

Author: Taleen Shamlian, Associate, Payments Consulting Network, Sydney
Email: 
taleen.shamlian@paymentsconsulting.com

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