Financial services: comply or pay the price

In her keynote address to the Australian Financial Review Banking Summit on May 31, 2022, ACCC Chair Gina Cass-Gottlieb announced that one of the ACCC’s top compliance and enforcement priorities in 2022 /23 is:

“…promoting competition and investigating allegations of anti-competitive behavior in the financial services industry, with a focus on payment services.”

A full copy of the speech is available on the ACCC website.

What does the ACCC do in the financial services and payments industry?

The ACCC Chairman acknowledged that the continued evolution of payment services towards payments in the digital age (via digitally stored cards) has seen the emergence of many services and competitors in the payments ecosystem and the financial services industry.

The ACCC takes a multidimensional approach to competition and consumer issues in the financial services and payments sector by engaging both in aggressive enforcement action and by working proactively with the industry to improve compliance and industry best practices. This includes the following activities:

  • Promote and protect competition in the financial services and payments sector, in particular in the face of rapidly changing supply and demand for payments (in particular, payment services).
  • Work with government to ensure that the regulatory framework for payments is designed to facilitate dynamic and innovative markets and positive consumer outcomes.
  • Initiation of proceedings in Federal Court against Mastercard Asia/Pacific Pte Ltd and Mastercard Asia/Pacific (Australia) Pty Ltd (together, Mastercard), for allegedly engaging in anti-competitive behavior beginning in late 2017. The alleged behavior occurred around the time the Reserve Bank of Australia expressed support for the Least Cost Routing initiative, which aimed to increase competition in the provision of debit card acceptance services and to reduce payment costs for businesses by allowing them to choose the least expensive network to process their transactions. These comments from the ACCC Chairman came just a day after the ACCC filed a lawsuit against Mastercard, which KWM commented on separately here.
  • Considering the need for new regulatory frameworks to address the competition and consumer concerns identified by the ACCC’s inquiry into digital platform services, referring specifically to concerns of self-preference, tied selling, aggregation and opt-out of processing by digital platform services.
  • Development of a mechanism for monitoring prices and margins in the foreign exchange sector to determine the impact of the ACCC’s recommendations on best practices published as part of the ACCC’s market investigation on foreign currency conversion services.
  • Engaging with industry, ASIC and law enforcement to protect Australian consumers from investment and cryptocurrency scams (see below for more details).
  • 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 more details).

Each of the activities described above demonstrates the importance and resources that ACCC invests in the financial services and payments sector.

Consumer protection against scams

Ms Cass-Gottlieb highlighted the disproportionate impact of financial services scams on customers from culturally and linguistically diverse communities. The ACCC Chairman noted language barriers and banks’ abilities to ensure quick access to support services and identify fraud risks. Ms. Cass-Gottlieb outlined 6 steps banks can take to increase their ability to support individuals or businesses at risk of scams, including:

  1. Prevent scammers from opening accounts at their establishment;
  2. Have rigorous identity verification processes informed by knowledge of the risk of scams;
  3. Ensure systems can flag and block suspicious transactions;
  4. Intervene to notify customers when suspicious transactions are identified;
  5. Introduce beneficiary confirmation to reduce losses from scams, especially through payment redirection scams (otherwise known as business email compromise scams); and
  6. Keep up to date with scam trends and educate employees about scams.

Additionally, the ACCC continues to engage with ASIC to ensure that mechanisms are in place to protect consumers from cryptocurrency scams under Australian Consumer Law, ASIC Law and of corporate law that, in a difficult regulatory landscape, would have resulted in consumers losing more than $100 million.

Consumer data rights

Finally, Ms. Cass-Gottlieb commended the tremendous efforts made by Australian businesses, particularly banks and fintechs, to implement consumer data rights and meet their CDR obligations. The ACCC Chairman reported the introduction of multi-sector data sharing in the energy sector from November 2022 and the continued expansion of CDR into telecommunications and finance.

These obligations promote greater competition for existing financial services and more competitive prices for consumers and, therefore, the ACCC takes compliance very seriously. Therefore, in order to avoid enforcement actions, data holders must ensure that they comply with their CDR obligations and legal requirements.

What are the main lessons for the financial sector?

The ACCC Chairman noted that the industry should be put 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 industry of the Australian economy, and to promote and enforce compliance in payments – the services sector will continue to be a top priority for the ACCC in the 2022-2023 financial year.

Going forward, businesses should expect the ACCC to investigate anti-competitive practices, including self-preference, tying, bundling and denial of transactions arising from significant competitive advantage. and greater market power.

Firms with significant economies of scale, network effects and vertical integration should take care, when expanding into the digital ecosystem, not to engage in such anti-competitive practices resulting from an ability to exert power over multiple services.

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