Why CBA (ASX:CBA) is backing the RBA in push for payment reforms

Fintech companies face different regulations from traditional banks.

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The Commonwealth Bank of Australia (ASX: CBA) has thrown its formidable weight behind the Reserve Bank of Australia's (RBA) governor, Phil Lowe.

CBA's CEO Matt Comyn said he agreed with Lowe that payment laws that apply to traditional banks should also apply to the big-name technology companies moving into the payments space.

Why are tech company payments regulations different?

The different regulatory playing fields for traditional banks like CBA and companies like Afterpay Ltd (ASX: APT), which Square Inc (NYSE: SQ) proposes to acquire for $39 billion, largely comes down to 2 words: system and services.

As the Australian Financial Review reports, Australian courts "have restricted the definition of payments 'system'". For that reason, the RBA wants to extend its mandate from "oversight of the payments 'system' to payments 'services'".

That would ensure that companies like Afterpay, as well as tech giants like Google (Alphabet Inc Class A (NASDAQ: GOOGL)) and Apple Inc (NASDAQ: AAPL) which are also moving into the payments space, will have to play by the same rules as CBA and the other big banks.

"I agree with the Governor's comments in that the definition of payments is very narrow at the moment," Comyn said.

He added (quoted in the AFR):

I do believe some competition issues could look to be addressed. I am sure policy makers will start at the principle [of what is in the best interest of country and customers] and it could lead to some quite significant reshaping of the laws, that currently aren't applied to a number of providers.

Comyn pointed out that this wasn't just an issue Down Under. "These exact discussions and debates, and some early legislation, are already occurring in other markets around the world," he said.

How has CBA been performing?

The CBA share price is up 44% over the past 12 months, well outpacing the 25% gains posted by the S&P/ASX 200 Index (ASX: XJO).

Year to date, the CBA share price continues to outperform, up 25% in 2021.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Alphabet (A shares), Alphabet (C shares), Apple, and Square. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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