Calls for greater competition in banking to support SMEs

| November 19, 2014

Concerns over the domination and control wheedled by the four major banks have been voiced to the Federal Government’s Competition Policy Review. Jost Stollmann of Tyro Payments believes it is time to take action again the unfair punishment of Australia’s small to medium business community.

Fines should be tripled for breaches of Australia’s competition law, to prevent the country’s four major banks from crushing smaller competitors.

In our submission to the Federal Government’s Competition Policy Review, we argues that Australia’s four major retail banks use their market power to stifle innovation among small and medium sized businesses (SMEs).

Technology is driving and accelerating change, and generating new wealth, but Australia’s four major banks with their market dominance, will do what they can to stifle innovation.

Startup or fast growth companies don’t have the resources to sue the banks, and the banks have deep enough pockets to fight any reasonable legal challenge.

The pattern of anti-competitive behaviour seems to be below the level of severity that allows the ACCC to intervene.

SMEs employ with more than seven million Australians almost 70 per cent of the workforce. They are the engine of jobs growth in this country, yet they are having to compete with financial lead in their saddle bags, courtesy of our major banks.

Tyro has made four recommendations to the Competition Policy Review:

1. Triple penalties for ACCC breaches

2. Strengthen the Competition Law and an ACCC Inquiry into anti-competitive structures and behaviors in Australia’s $440 billion annual card payment space

3. Review Australian Government procurement policies and procedures to promote competition and innovation through open panel tendering

4. Encourage the regulator to open up access of the payment system to new technology players, while maintaining supervision and a level playing field.

The Australian banking system has found it difficult to support the SME community with efficient transactional banking and funding solutions.

Prosperity in the new digital century will come to a large extent from startups and fast growth companies building the technologies and business models of the future and that for the global markets.

It is critical that Australia’s small-to-medium business people as well as its start-up and fast growth entrepreneurs believe in fairness and accessibility.

The scorecard is not good.

When the Reserve Bank of Australia invited non-banks to compete with the dominant retail banks in the payment space in the late 1990s, only Tyro Payments picked-up the challenge.

Today, Tyro Payments turns over $6.5 billion in payments per year and processes 14 million Medicare payments annually.

Tyro battled the banks for market access and saw how they actively hindered new entrants, stifled investment in inter-bank infrastructure, and used discriminating settlement practices and cross-subsidising

Ultimately, this is bad for small businesses, jobs growth and consumers, as it keeps prices artificially high.

The Review of Competition Policy is a great opportunity to reverse the community’s prevailing skepticism and cynicism in that regard. The task for such a Review is challenging, because the predominant voices raised in such inquiries are those of the establishment and their consultants and lobbyist.

Australia has lagged behind other Western countries when it comes to encouraging innovation and exploring new technologies.

The anti-competitive structure and behaviour of Australia’s oligopolistic banking sector stifles innovation, reduces productivity, eliminates choice, taxes the SME business community and ultimately increases costs to the consumer.

It’s ultimately in the best interest of everyone, SMEs, the major retail banks, government bodies, card issuers and merchants to encourage, fund  and support innovation and healthy market competition.

Jost Stollmann is Executive Director and Chief Executive Officer of Tyro Payments. In 1984 he founded and grew the German system and network integrator CompuNet Computer AG into a one billion dollar company. In 1996, he sold it to GE Capital US and led the integration and expansion of GE Capital IT Solutions across Europe.  In 1998, as Federal Shadow Minister of Economy and Technology, Jost ran his successful election campaign making a significant contribution to the landslide victory of Gerhard Schröder to the Chancellorship of Germany. Jost commissioned an award winning 40m high performance racer-cruiser and sailed with his family around the globe before settling in Sydney in 2004.