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RBA warns of 'lock-out' risk from rise of phone payments

By Clancy Yeats The Age

The Reserve Bank has warned that growth in payments driven by smart phones, watches and other wearable devices must not stifle competition, as this would push up costs for business.

As more consumers move towards using their smart phone as a "digital wallet," payment scheme Eftpos has recently complained that they are too often being excluded in favour of Visa and Mastercard's debit payment systems, and the RBA echoed these concerns on Thursday.

Michele Bullock, an assistant governor with responsibility for the financial system, said that the shift to tap-and-go payments had caused payment costs for businesses to rise.

This happened because there was a sharp increase in payments going via the higher-cost Visa or Mastercard network instead of through Eftpos as had occurred previously.

She said most banks were now dealing with this issue by giving businesses the option to divert these payments via Eftpos, but the RBA was closely watching the next shift towards "digital wallets."

"As payments move to different form factors, such as mobile phones or wearables, and new technologies are introduced, there is a risk that some may use it as an opportunity to lock out competitors," Ms Bullock said.

"The Reserve Bank is of the view that in moving to new technologies, merchants and consumers should continue to have a choice of debit card network."

Rules or policies of any scheme that have the effect of removing choice will reduce competition and result in rising costs to merchants," she said.

The central bank would keep a close eye on the debit card market, she said, to make sure there was a level playing field, and would work with the Australian Competition and Consumer Commission to detect any anti-competitive conduct.

Ms Bullock also reiterated the RBA's disappointment over the slow rollout of the new payments platform by some of the major banks, saying "we have been somewhat underwhelmed by the progress of some of the major banks."

Ms Bullock said the benefits of faster payments, which the NPP allows, would "increase disproportionately" as more people were able to make or receive the payments, but these benefits had been "held back" by the delay in the platform's rollout.

"In order to realise the full benefits of the NPP, most financial institutions, particularly the larger ones, need to be involved in sending and receiving fast payments," Ms Bullock said.

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Let's work together to make early and on-time payments the new norm.

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