Afterpay tells RBA it’s ‘not a payments system’
Afterpay has told the Reserve Bank of Australia it “should not be considered a payment system”, and its merchant fees need to be benchmarked against the much higher costs that Facebook, Google and Amazon charge for business referrals.
As the Reserve Bank considers whether to stop buy now, pay later providers preventing merchants from passing costs on to customers, part of a broad review of the payments system, Afterpay has implored the central bank to avoid imposing regulation that would “stifle innovation, compromise consumer choice and reduce competition”.
It said regulation of the still young buy now, pay later industry should be a matter for the Parliament, and suggested if the RBA’s Payments System Board moved to prevent its “no surcharging” clauses, it would be acting outside its legislative authority.
There are “important and fundamental differences” between Afterpay and credit card schemes, including Afterpay being a significant customer acquisition channel for merchants. Afterpay told the RBA, in a submission sent on Thursday, its popularity with retailers isn’t due to its payment processing functionality but the marketing components of the platform that connects retailer with hard-to-reach Millennial customers.
Benefits to merchants from accepting Afterpay “go well beyond the transaction itself”, it said, and include higher order values, increased number of orders, increased customer base, lower marketing costs, lower customer service costs, lower return rates and lower fraud rates. Because Afterpay pays merchants upfront, it also helps improve cash flow and eliminates fraud risk for merchants, including chargebacks.
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