You’d think that Philip Lowe’s shock rate rise would be the biggest RBA story this week…
The way the All Ords reacted, it seems clear that few were expecting this latest hike.
A steep plunge following the decision has put all Aussie investors on notice.
Not even the typically defensive stocks may be safe from Lowe’s rampage.
That’s why we all need to prepare for the short-term pain to continue.
But more worrying than this rate rise is the long-term implications of another RBA development this week. And as with most worrying developments, it starts with the government…
Treasurer Jim Chalmers decreed yesterday that our payments systems must be modernised. As a result, cheques will no longer be useable in Australia from 2030 onwards, for example.
That’s just one example of the sweeping digitisation that the government hopes to normalise.
Of course, for most Aussies, this isn’t a big deal.
Cheques have been largely obsolete for years at this point.
However, the devil is in the details.
Because with new systems comes new rules.
And who gets to enforce those rules?
The RBA…
New rules, new control
You see, in today’s day and age, the ways we pay are extremely varied.
It’s not as simple as it used to be when banks were the be all and end all.
Thanks to smartphones and the internet, we now have digital payment platforms. Apps like Google Pay and Apple Pay have made transactions not only easier than ever but also more diverse. Not to mention the rise of alternative payment options like ‘buy now, pay later’.
My point is, your money is processed by a lot more people than just your bank nowadays.
That’s great for the consumer because it means we have more competition. Rather than being left at the mercy of only the banks, we have many options for the way we pay.
But of course, the government doesn’t like that because they can’t control it as easily.
In Chalmers’ own words:
‘But we recognise that all of this [ongoing digitisation] will be incomplete unless we get the policy and regulatory settings right in finance — and especially in payments.
‘That’s because payments are the tracks on which our economy runs…
‘…On the legislative front, we’ll be making changes to the Payments System Regulation Act — to make sure we’ve got the powers to respond to emerging challenges —
‘And we’ll be pursuing a new licensing framework too — so that payments providers are treated consistently, no matter the technology they’re using…
‘…Treasury will be leading work here to improve co‑ordination amongst regulators —
‘With a particular focus on making sure that new entrants have clear, transparent direction on what they need to do to access the system.
‘These reforms will make sure that payments providers know their obligations, and their rights.’
It all sounds well and good with the typical dose of spin, but I don’t buy it.
This is more akin to a thinly veiled threat for digital payment providers to toe the line. Because if they don’t, it’s pretty clear that they won’t be welcomed into this new system.
And that’s where the RBA will gain the ability to swing their new stick.
Digital wallets on the chopping block
The biggest loser in all of this will be digital wallets.
That’s thanks largely due to the ongoing conflict between the CBA and Apple.
CBA’s CEO Matt Comyn has had some choice words about Apple and their market power. Specifically, Comyn isn’t happy with the terms that Apple is offering to allow the CommBank app to make tap and go payments on Apple devices.
After all, like any app, Apple inevitably takes its cut of any purchase.
That’s why Comyn has got his buddies Chalmers and Lowe to fight his fight for him. He has convinced the government and the new regulators to intervene on his behalf.
How this contention will be resolved I cannot say, but it is not my main concern.
The real concern is how far the RBA will go with its intervention.
Because if there is one constant to be learned from regulation, it’s that more choice and freedom is rarely the goal. As the AFR even notes:
‘Apple said banks and other companies can access NFC functionality from their own apps via Apple’s application programming interfaces, pointing to Afterpay as an example.
‘But allowing CBA to have sole control of the NFC controller would assist them in not only locking out competitors but also prevent innovation around non-bank use cases such as car keys or health insurance cards.’
It’s never really about keeping us safe and secure.
It’s always about gaining more control.
Because while it may start with digital wallets, no one knows where it will end.
Tune in tomorrow for more details…
Regards,
 |
Ryan Clarkson-Ledward,
Editor, Money Morning
