There are four areas where we do not agree with the Committee’s findings and recommendations and issue these dissenting comments in relation to those aspects.
Overall, aside from these areas, the report is robust and the recommendations are supported.
Liberal Government’s poor track record
We do not share the unfounded optimism of Government members that urgently needed action on payments policy and regulation is finally nigh. Indeed they write at 4.73 “with the release of the Farrell Review, the committee is cautiously optimistic that much-needed reforms are progressing”.
Unfortunately, while we all may hope for action, there is no basis whatsoever for optimism that the Government will finally act just because they have received yet another review.
The Government is now in its 9th year of office. During this time the payments landscape has transformed rapidly, seeing new technology and numerous new entrants into the ecosystem and market. Australia has experienced the rise of behemoths GooglePay and ApplePay, pioneered new forms of credit such as Buy Now Pay Later (BNPL), and seen more consumers experiment with new payment technologies including stored value facilities.
The Government has received multiple reports over 8 years with increasingly urgent recommendations for change, yet has implemented few to none of the necessary reforms.
For example, regulation regarding stored value facilities was recommended in the 2014 Financial System Murray Inquiry; the 2018 Productivity Commission Report into competition and financial services; by the Council of Financial Regulators in 2020; and now the 2021 Farrell Review.
Scott Farrell of course has completed two previous inquiries for the Government, the first of which has been responded to, however the Government has failed to respond to his second report received in October 2020 and released in December 2020.
Eight years of inaction, including no response whatsoever to the previous Farrell Report, is hardly the basis for confidence that something will now happen in response to this third Farrell Report.
Avoiding politicisation of payments regulation
Recommendation 1 calls for Treasury to exhibit “leadership” in “the payments space”. We are not convinced that payments policy and regulation should be led by Treasury under this Treasurer.
We agree that the Treasury needs to enhance its capability and capacity to engage in payments policy and regulatory debates. Under the current Treasurer, however, we risk a very different approach to that exhibited by the Reserve Bank of Australia (RBA).
Policy decisions under the current Treasurer have been characterised by inexplicable delays, capriciousness and accommodation of vested interests close to the Liberal Party.
The Treasurer has failed again and again to put the interests of consumers first, and ensure that policy is fit for purpose. For example, during the COVID-19 pandemic, he has recklessly used his powers as Treasurer to attack access to justice for individuals through class actions. Placing payments regulation in the hands of the current Treasurer risks the extension of this capricious approach.
In our view, significant regulatory changes are required now to respond to rapid changes of recent years and set up the system for the future. These may well need to be devised with or outside the RBA. However, there may be benefit in allowing payments policy to be led by an independent regulator or body outside the direct control of the Treasurer and hence impervious to vested interests, lobbyists, rent seeking behaviour and politicisation.
Access to Apple’s NFC Chip
Third party access to Apple’s NFC Chip is a controversial issue which has vexed Parliaments and regulators worldwide. The report summarises well the issues and arguments which do not need to be repeated here. Government members conclude “the committee does not recommend Apple be forced to grant direct operating-system-level third-party access to its NFC antenna at this time”, going on to note the Australian Competition and Consumer Commission’s (ACCC) examination of this issue.
We consider however that the onus needs to be reversed. The default position should be a presumption of open access of critical hardware on reasonable commercial terms and this should include Apple.
Parliament is no stranger to these regulatory issues. Sectors such as railways, telecommunications and ports have long had regulatory architecture and access regimes to promote competition and innovation, and prevent unfair or uncompetitive use of market power or dominance. A reasonable analogy is the telecommunications network infrastructure where network infrastructure cables that send the signals are subject to open access regulation.
The presumption of Parliament and the regulators should be in favour of open access regimes on reasonable commercial terms to maximise competition and innovation, and it should then be up to Apple or any other handset manufacturer to argue why they should be an exception.
This does not mean that no controls can be placed on access to protect security and privacy. There may be genuine security reasons why access should be controlled, but those circumstances should be considered on a case-by-case basis, with input from Australia’s cyber security community.
It is acknowledged that new payments technology, such as QR codes soon to be seen in Australian shops, may mitigate or reduce the competitive concerns raised by Apple’s refusal to allow access to its NFC. These may well be arguments that Apple can make to the ACCC.
We consider however that Parliament should clearly favour a presumption of competition and open access regimes, and that this would be the correct starting point for the work of agencies including the ACCC.
BNPL and consumer regulation
Recommendation 13 regarding BNPL is vague and unnecessarily obtuse.
Industry self-regulation via the BNPL Industry Code of Practice has been a reasonable approach to date as the sector developed and matured.
Industry self-regulation is unlikely to be appropriate forever, and there is a prima facie and growing case for fit-for-purpose regulation of the BNPL sector to entrench consumer protections, ensure credit providers are placed on a fair regulatory playing field, and promote competition and a reduction in fees.
This should be the subject of a focussed inquiry in the next term of Parliament and it would have been preferable for the Committee to say so directly.
Mr Julian Hill MPSenator Louise PrattSenator Deborah O’Neill
Mr Steve Georganas MP
Deputy Chair