The Australian Competition and Consumer Commission (ACCC) on Thursday authorised the proposed merger of Eftpos with BPAY Group Holding Pty Ltd and NPP Australia Ltd (NPPA) after the watchdog accepted a court-enforceable undertaking offered by the parties.

"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.

Eftpos, BPay, and NPPA announced plans in December to amalgamate. Eftpos operates a network of payment terminals, Bpay is an electronic bill payments system, while NPPA is the company charged with the oversight of all of the transactions moving through Australia's updated payments system, the NPP. Once due diligence is complete, the companies will emerge together as Australian Payments Plus Ltd, or AP+.

After considering a number of potential impacts on competition, including concerns raised by industry participants about the impact of the amalgamation on Eftpos' services and least cost routing (LCR), Sims said the ACCC found at a high level that the services of the three companies did not compete closely.

LCR is an initiative aimed at promoting competition in the debit card market and helping to reduce payment costs in the economy.

When a customer makes a contactless "tap-and-go" payment with their dual-network debit card -- not credit cards, however -- the merchant may choose to send the transaction via the debit network that costs them the least to accept. If the merchant chooses not to route, the transaction is instead sent via the default network which is programmed on the card, typically the Debit Mastercard or Visa Debit network.

"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," Sims said.

"The ACCC recognises that rapid change is taking place in the sector, but ultimately it was satisfied that, with the undertaking, the amalgamation will not have a significant adverse impact on Eftpos' services or the availability of least cost routing."

The now accepted undertaking includes obligations that AP+ will ensure Eftpos will do everything in its control to make LCR available for four years and ensure the Eftpos payments scheme and the Eftpos card-based issuing and acceptance infrastructure and services are maintained for three years.

It also seeks to ensure that Eftpos and NPPA develop and make available a set of prescribed services within agreed timeframes; and ensure that BPAY, Eftpos, and NPPA agree on an industry-wide standard supporting payment with QR codes by the end of June 2022.

AP+ will also submit a report to the ACCC every six months to demonstrate its compliance.

"We accepted the undertaking because we consider it will help ensure that Eftpos will develop and improve its debit-based payment services for point of sale, online and in-app payments," Sims said.

The ACCC also found that competition between the payment services of Eftpos, BPAY and, NPPA is marginal, because their core payment services are for different uses and are largely complementary.

"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," Sims added.

"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.

"Further, the merger will enable the three payment schemes to coordinate investment proposals and avoid inefficient duplicative spending. Importantly, this will increase the likelihood of the major banks and other shareholders investing in domestic payment services."

According to Sims, this is likely to result in public benefit, by placing them in a better position to deliver payment service initiatives more quickly and successfully, for the benefit of consumers and businesses.

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