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RBA Risks ‘Stifling Innovation,’ Says Afterpay Boss

The boss of ASX darling Afterpay has shot the Reserve Bank of Australia (RBA) a warning that it risks ‘stifling innovation’ by regulating the buy now, pay later financial services space.

In a letter sent to the RBA, first reported on by The Australian, Afterpay managing director and CEO Anthony Eisen said any regulation of the industry should be left to parliament while claiming his company competes with tech giants like Facebook and Google instead of card providers, like Visa and Mastercard.

The RBA is considering changes that would halt buy now, pay later service providers like Afterpay and Zip Co. from stopping its merchants passing costs on to consumers.

‘We urge the RBA to carefully consider the differences of a platform such as Afterpay compared with traditional card payments, and avoid applying a regulatory framework that would stifle innovation, compromise consumer choice and reduce competition,’ Eisen said, according to the publication.

‘Through its unique business model, Afterpay actively competes for both merchants and consumers, and competes with marketing platforms such as Google and Facebook.

(AAP Image/Derek Rose) 

‘Because of the package of benefits associated with the Afterpay platform, merchants are not raising prices on products that are more frequently purchased using Afterpay. And unlike card payments, Afterpay’s customers do not cross-subsidise one another.’

Eisen also argued that the service was still in its infancy, accounting for less than one per cent of transactions in the overall economy. He argued that the regulation imposed by the RBA would not be in the public interest and should instead be managed by parliament.

Eisen also denied that his company was a payment service, claiming instead that it was a tech company like Uber, Amazon or eBay.

Those tech companies, he said, paid fees for customer referrals of between 10 to 15 per cent, which was much higher than the typical Afterpay fee. For example, Uber Eats charges a 30 per cent merchant fee on each order received through their platforms.

Eisen said his platform was constituted by multiple bilateral relationships instead of operating on a system that see’s net payments between multiple parties.

He argued that the buy now, pay later industry was growing and innovative, which should warrant it to be recognised for its efforts and be enabled to self-regulate and raise their own standards.

Eisen also highlighted analysis from research firm AlphaBeta, which concluded Afterpay did not lead to increases in item prices; that instead encouraged more frequent purchases through the platform, resulting in a fall in prices than the items purchased the least on the Afterpay.

The RBA is set to make the decision for regulation later this year.

Afterpay’s shares were down 0.91 per cent to $38.87 on Thursday afternoon.

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