Financial Services: Comply or Pay the Price
In her keynote address to the Australian Financial Review Banking Summit on 31 May 2022, ACCC Chair Gina Cass-Gottlieb announced that one of the key compliance and enforcement priorities for the ACCC in 2022/23 is:
“…promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services.”
A full copy of the speech can be found on the ACCC website.
What is the ACCC doing in the financial services and payments sector?
The ACCC Chair recognised that the continuing development in payment services towards payments in the digital era (through digitally stored cards) has seen the emergence of numerous services and competitors in the payments ecosystem and financial services industry.
The ACCC is taking a multifaceted approach to competition and consumer issues in the financial services and payments sector by engaging in both strong enforcement action and proactively working with the industry to raise compliance and best practice in the sector. This includes the following activities:
- Promoting and protecting competition in the financial services and payments sector, particularly in the face of the rapid developments in supply and demand in relation to payments (specifically, payment services).
- Working with the Government to ensure that the regulatory framework for payments is designed to facilitate dynamic and innovative markets and positive consumer outcomes.
- Instituting proceedings in the Federal Court against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd (together, Mastercard), for allegedly engaging in anti-competitive conduct commencing in late 2017. The alleged conduct occurred around the time the Reserve Bank of Australia expressed its support for the least cost routing initiative, which aimed to increase competition in the supply of debit card acceptance services and reduce payment costs for businesses by allowing them to choose the lowest cost network to process their transactions. These comments by the ACCC Chair came just one day after the ACCC instituted proceedings against Mastercard, which KWM has commented on separately here.
- Considering the need for new regulatory frameworks to address competition and consumer concerns identified by the ACCC’s Digital Platforms Services Inquiry, referring specifically to concerns of self-preferencing, tying, bundling and refusals to deal by digital platform services.
- Developing a mechanism to monitor prices and margins in the foreign currency industry to determine the impact of the ACCC’s best practice guidance that was released as part of the ACCC’s market inquiry into foreign currency conversion services.
- Engaging with industry, ASIC and law enforcement to protect Australian consumers from investment and cryptocurrency scams (see below for further detail).
- Active engagement in the implementation and operation of the Consumer Data Right (CDR), which is a reform that gives consumers the right to use the data Australian businesses hold about them for their own benefit (see below for further detail).
Each of the activities outlined above demonstrate the significant focus and resources that the ACCC is investing in the financial services and payments sector.
Consumer protection against scams
Ms Cass-Gottlieb emphasised the disproportionate impact of financial services scams on customers from culturally and linguistically diverse communities. The ACCC Chair noted the language barriers and banks’ abilities to ensure timely access to support services and identify fraud risks. Ms Cass-Gottlieb outlined 6 steps that banks can do to increase their capacity to support people or businesses at risk of scams, including:
- Prevent scammers from opening accounts at their institution;
- Have rigorous identity verification processes informed by knowledge of the risk of scams;
- Ensure systems can flag and block suspicious transactions;
- Intervene to warn customers when suspicious transactions are identified;
- Introduce confirmation of payees to reduce the losses to scams, especially through payment redirections scams (otherwise known as Business Email Compromise scams); and
- Stay on top of scam trends and educate employees about scams.
Additionally, the ACCC is continuing to engage with ASIC to ensure there are mechanisms in place to protect consumers from cryptocurrency scams under the Australian Consumer Law, the ASIC Act and the Corporations Act which, in a challenging regulatory landscape, have reportedly resulted in the loss of more than $100 million by consumers.
Consumer Data Right
Finally, Ms Cass-Gottlieb praised the great lengths taken Australian businesses, specifically banks and fintechs, to implement the Consumer Data Right and keep up with their CDR obligations. The ACCC Chair flagged the introduction of multi-sector data sharing in the energy sector from November 2022 and the further expansion of the CDR into telecommunications and finance.
These obligations promote greater competition for existing financial services and more competitive pricing for consumers and, accordingly, the ACCC takes compliance very seriously. Accordingly, in order to avoid enforcement action, data holders should ensure they are meeting their CDR obligations and legal requirements.
What are the key lessons for the financial sector?
The ACCC Chair noted that the industry should be on notice that the ACCC will not hesitate to take action in response to concerns raised about anti-competitive conduct in the financial services and payments sector of Australia’s economy, and promoting and enforcing compliance in the payments-services sector would continue to be a top priority for the ACCC during the 2022-2023 financial year.
Going forward, businesses should expect the ACCC to investigate anti-competitive practices including self-preferencing, tying, bundling and refusals to deal arising from significant competitive advantage and superior market power.
Companies with significant economies of scale, network effects and vertical integration should take care when expanding into the digital ecosystem to not engage in such anti-competitive practices arising from an ability to exercise power across multiple services.
By Taylor Macdonald and Sam Orchard
competition in the financial services sector