RBA Payments System Board expressed its opinion on PayPal rules

Recently, the Payments System Board of Reserve Bank of Australia (RBA) at its meeting presented a number of issues. Besides the reform of the ATM system, disclosure arrangements for equities securities lending, the oversight of foreign central counterparties the Board revealed its view on limitation imposed on merchants by PayPal. 

The Board has recently been considering PayPal’s and eBay’s rules that prohibit merchants from surcharging customers for the use of PayPal and from discouraging the use of PayPal.

The Board’s thinks that no-surcharge rules can limit merchant choice and competition and can be detrimental to the efficiency of the payments system as a whole, particularly where merchants’ ability to decrease acceptance of a particular payment instrument is limited. Nevertheless PayPal appeared to be a relatively small player in the online market – outside of eBay, most merchants are able to decrease acceptance of PayPal if the benefits of accepting it do not outweigh the costs of the limitations.

In case the PayPal system grows significantly, this assessment may change over time. PayPal in turn admits that in case it increases in size substantially, its no-surcharge rule will need to be removed for consistency with other payment systems, and that it will not increase its standard published fees for eBay sellers for a period of two years.

While eBay itself is not a payment system, and thus falls outside the Board’s regulatory powers, the Bank encourages eBay to reconsider its policies in this area. The Board has also considered eBay’s rule that mandates acceptance of PayPal by sellers on eBay. 

Looking forward, the Bank will be collecting additional data from PayPal and other on-line payment systems on a regular basis to assist in its monitoring of market developments.

The Board has been assured that eBay and PayPal’s current ‘no discouragement’ rules do not prevent sellers from expressing a preference for an alternative payment system.