Rba May Buy Into Ebay's Paypal Push

The Age

Wednesday April 23, 2008

Asher Moses and Jacob Saulwick

EBAY'S plan to force all its users on to PayPal faces opposition from the Reserve Bank, which is considering weighing into the issue.

The central bank has long called for buyers and sellers to have as much choice as possible in the payment systems they use, and strongly opposes any moves that reduce competition in the market.

The Australian Competition and Consumer Commission is examining whether eBay Australia's policy of forcing items to be paid for using PayPal, which eBay owns, or cash on delivery or pick-up, breaches trade practice and competition laws.

PayPal performs payment processing for online sellers, allowing them to accept credit card payments and money transfers without having their own merchant credit card accounts.

The policy, to come into effect on June 17, will mean direct bank deposits, cheques and money orders will be barred.

The move by the auction site is at present limited to Australia and will hit sellers with extra fees because PayPal charges them a fee between 1.1% and 2.4% to accept payments via the service.

Several groups have expressed concern that forcing eBay users onto PayPal would prevent the emergence of competitors to PayPal in the online payments market.

The ACCC is inviting submissions from the public on the issue until May 2. It is believed the Reserve Bank, which in the past has stated it would like more competition for payments over the internet rather than less, is now deciding whether to make a submission.

Strong opposition from the central bank would almost certainly scuttle eBay's plans. The auction site's global chief executive, John Donahue, has said the PayPal policy will be rolled out worldwide if it is successful here.

The Professional eBay Sellers Alliance, which includes eBay's top sellers who generate hundreds of millions of dollars in sales on the site each year, strongly opposes the changes and plans to lead a worldwide revolt.

Alastair MacGibbon, eBay's trust and safety director, said the announcement was designed to protect users, claiming people are four times less likely to have a problem on eBay if they pay using PayPal than with other methods.

The Reserve Bank has ruled out stepping back from regulating the payments system, and remains concerned about the level of market power held by credit card companies.

It has expressed support for new methods of payment that could act as competition for international card schemes. New methods could give merchants and customers more choice about how they make and receive payments.

A 2006 speech by an assistant governor of the Reserve, Philip Lowe, documented the growth of alternative payment schemes overseas that had not yet been adopted in Australia.

Some countries have adopted "online debit" schemes that allow customers to transfer money directly from their bank account to the merchant without using a credit card or scheme debit card.

KEY POINTS

? eBay wants to make PayPal the only payment option on its online system.

? Australia would be the test case for other markets.

? The RBA is looking closely.