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Purchases with Afterpay and Zip could soon cost more


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The RBA will investigate the "no surcharge" rule that applies to retailers.

The Reserve Bank of Australia (RBA) has announced it will be investigating policy issues associated with the growth of the buy now, pay later space, and it could see a price increase for consumers. Currently, buy now, pay later (BNPL) providers such as Afterpay and Zip charge retailers to offer their services. This cost is not passed on as a surcharge.

According to the RBA's Payment Systems Board annual report: "This can be problematic for merchants that feel compelled to offer BNPL services as a payment option for competitive reasons, but are unable to recoup the merchant fees from the customers that directly benefit from the service."

Because of this, the RBA will be reviewing whether there are any policy issues regarding the "no surcharge" rule as part of its 2020 review of card payments regulation.

Surcharges are standard practice in the card space and help inform a consumer's decision about what card to apply for but also what card to use at the checkout. As some cards are more expensive for merchants to process, a higher surcharge is passed on to the consumer.

Credit card surcharges are currently limited to what it costs the retailer to accept the credit card, which is usually between 1-3%. There are no details as to what a buy now, pay later surcharge policy or cost may look like, but it can cost a retailer between 2-4% or 4-6% commission rate plus a per-transaction fee to accept a buy now, pay later purchase.

The announcement from the RBA comes as Afterpay co-founder and CEO Anthony Eisen defended the company this week off the back of a UBS report that said the company's share price could halve in the next 12 months.

The UBS report found two key risks with Afterpay's product: could Afterpay be considered a provider of credit in the future, and can Afterpay continue to prohibit merchants from surcharging?

"In our view, somewhat paradoxically, the more successful Afterpay is, the more likely it will attract regulatory scrutiny," the report read.

Speaking at the Intersekt conference in Melbourne, Eisen said that regulators had already reviewed the sector extensively.

"Regulation has to be about doing the right thing. Full stop. If you don't do the right thing either the customer's not going to use you or some other power in the economy is going to stop you."

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