Competition watchdog weighs benefits of LCR in merger approval

By Fergus Halliday
 — 1 minute read

The local competition watchdog has given its approval of a merger between three major players in Australia’s payment processing sector.

The Australian Consumer and Competition Commission (ACCC) has given the green light to the proposed merger of BPAY, eftpos and NPPA. 

“We do not consider that the merger of these parties will substantially lessen competition in any payments market, after taking into account the court-enforceable undertaking,” ACCC chair Rod Sims said.


Announced in December last year, the merger will see three players within Australia’s payments processing landscape become one.

While the payments processing ecosystem is garnering more attention from regulators and legislators in recent years, the ACCC found that there was little overlap between the three companies “because their core payment services are for different uses and are largely complementary.”

After investigating potential impacts on competition and concerns raised by industry participants, the ACCC found that, at a high level, the services of the three companies do not closely compete.

Mr Sims admitted that “the merger will likely soften competition to some extent between BPAY, eftpos and NPPA in certain areas where they were looking to expand beyond their core offerings or competing to bring new services to market.”

“However, this is unlikely to result in a substantial lessening of competition because strong competitors will remain, including Visa and Mastercard,” he explained.

In addition to the minimal impacts on competition, the ACCC noted that the merger parties have committed to supporting the availability and promotion of least cost routing (LCR).

This practice allows merchants to reduce their payment processing fees by choosing the payment scheme that processes transactions in the most cost-effective route whenever consumers use a dual-network debit card.

The regulator noted that the Reserve Bank of Australia would oversee this commitment to supporting LCR. 

“eftpos is important to the availability of least cost routing, as the only current alternative network to the Visa and Mastercard networks through which debit transactions can be routed,” Mr Sims noted.

The merger approval also requires eftpos and NPPA to develop and make available a set of services within agreed time frames, such as fraud prevention measures, support for online and in-app payments via eftpos debit cards and the development of an industry-wide standard for payment with QR codes by the end of June 2022. 

Over the medium to long-term, the ACCC said it expects the public to benefit from the merger via the improved and consolidated services the new entity would provide.

“The banks have an influential role in deciding what payment services to implement, and would be reluctant to support multiple and overlapping payment service initiatives with or without the merger.”

The regulator predicted this merger will push the three payment schemes to coordinate investment and reduce inefficient and duplicative spending, passing the savings to customers and businesses.

“Importantly, this will increase the likelihood of the major banks and other shareholders investing in domestic payment services,” he said. 


Competition watchdog weighs benefits of LCR in merger approval
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