Regulation has become a big concern for the Australian start-up community, particularly around financial services, a source close to the committee said. The RBA has previously considered intervening in rules stopping retailers from surcharging customers using buy-now, pay-later services, which could undermine these business models.
Promoting competition in a sector dominated by the big four banks was also a major concern, the source said.
The Commonwealth Bank has backed instalment pay service Klarna, a direct competitor to Afterpay, which has criticised its popular rival for charging merchants unsustainable commissions.
The hearings come a year since Afterpay and Zip fronted a Labor-led Senate inquiry that recommended forcing small credit providers to act in the best interest of customers and to be members of the official complaints authority, but did not recommend services like Afterpay be forced to undertake costly credit checks on clients.
The new committee, chaired by Liberal Senator Andrew Bragg, will scrutinise the barriers affecting the uptake of new technology in the sector.
Mr Bragg said the review was aimed at getting a better deal for consumers and tapping into “hundreds of thousands” of jobs that are available if the policy settings are right.
“FinTech is the bridge to the future of more choice, more competition. That bridge needs to be fostered, not killed off through regulatory culture,” he said, adding innovation and consumer protection needed to be “balanced”.
Afterpay, which employs 195 people in Australia, made a submission to the review saying it was involved in 10 per cent of all online retail purchases for physical items.
The submission warned that action by regulators could be disproportionate and could damage a young business’ ability to drum up support from investors.
However, leading consumer groups have called for regulation of how Afterpay deals with retailers, claiming buy-now, pay-later providers push up the price of goods and services for all consumers.
In a submission to the Reserve Bank’s review of retail payments regulation, four leading consumer bodies urged the central bank to step in to allow retailers to impose a surcharge to cover the high cost of offering these services to customers. Afterpay, unlike credit card companies, does not allow retailers to add a surcharge if they choose to pay through the scheme.
“This cost is ultimately borne by consumers through increased prices, as merchant payment fees are built into the overall price of goods and through payment of late fees and other charges,” the submission from Choice, Consumer Action Law centre, Financial Counselling Australia and the Financial Rights Legal Centre said.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.
Clancy Yeates is a business reporter.