By Paulina Duran
SYDNEY (Reuters) – Australia’s central bank on Friday said that buy now, pay later (BNPL) firms will no longer be able to prohibit merchants from passing-on surcharges for their services, levelling the playing field with banks and credit card providers.
Following a two-year review the Reserve Bank of Australia said it was now engaging with Treasury on “regulatory approaches” to enforce its decision – a move that has been fiercely opposed by the fast-growing industry.
While the central bank had previously flagged it would review the industry’s no-surcharge rule again in the near future, it noted that BNPL services tend to be quite expensive for merchants to accept and it “has now concluded that there is a public interest case for BNPL providers to remove their no-surcharge rules.”
Australia is home to some of the world’s biggest BNPL firms including Afterpay Ltd which this year agreed to be bought by Square Inc https://www.reuters.com/technology/square-buy-australias-afterpay-29-billion-2021-08-01 for $29 billion. Afterpay’s shares were flat in Friday trade though shares of rivals Zip Co Ltd and Sezzle Inc lost 2% and 1% respectively.
The RBA also said it would force eight banks and debit card issuers with about A$4 billion in annual debit transactions to give merchants a multiple network option that would allow payments to be processed more cheaply.
A multiple network option allows businesses to choose cheaper domestic systems instead of the prevalent but more expensive Visa Inc and Mastercard Inc networks.
Other changes include requiring offshore firms to publish interchange fees on transactions on foreign-issued cards on their websites “which will be a low-cost way of shining a light on these relatively high fees,” its 108-page report https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/conclusions-paper-202110/pdf/review-of-retail-payments-regulation-conclusions-paper-202110.pdf said.
(Reporting by Paulina Duran in Sydney; Editing by Edwina Gibbs)
