The popular payment services of tech giants like Apple and Google should be regulated in the same way as those run by banks, financial industry figures have argued as Parliament debates long-stagnant legislation that would overhaul rules first introduced in 1998.
Proposed changes to the Payment Systems (Regulation) Act 1998 (PSRA) – contained in the Treasury Laws Amendment (Miscellaneous Measures) Bill 2024 – would empower the Reserve Bank of Australia (RBA) to regulate both traditional and new payments providers.
The original legislation defines ‘payment system’ in terms of the circulation of money, but the proposed reforms would expand this to include payment systems using non-monetary digital assets, including digital currencies and ‘closed loop’ systems.
This would capture digital payment services such as Apple Pay and Google Wallet, whose growth the government’s 2021 Review of the Australian Payment System report warned “has important implications for competition and systemic risk within the payments ecosystem.”
Four years later, legislative reform is still stalled, leading Australian Banking Association (ABA) CEO Anna Bligh – who this month announced her retirement after eight years at the ABA – to spruik it as essential to bring PSRA into today’s “digitally dominant world.”
“The payments system has rapidly evolved, yet regulations have not been updated for over 25 years,” she said.
“When the current laws were made, cash and cheques were dominant payment methods, Internet shopping didn’t exist, and mobile phones still had antennas.”
Today, Australians are making 500 million payments per month using mobile wallets that have become a “dominant force in Australia’s payments architecture”, she said, arguing that new rules are “urgently needed to ensure payments regulations remain fit-for-purpose.”
“It’s only fair that global tech companies are subject to the same oversight and consumer protection laws as the rest of the payments system.”
Tech giants facing government crackdown
Despite the seemingly benign nature of changes updating existing rules to reflect 27 years of technological change, the new legislation has been contentious – not the least because it provides ministerial discretion to designate payment systems if in the ‘national interest’.
That discretion would allow the minister to flag ‘special designated payment systems’ and could appoint special regulators to manage them – suggesting that “contemptuous” digital giants could face specific payment system controls amidst broader government crackdowns.
This level of discretion has previously alarmed the RBA, which previously warned that such powers “would undermine the policy independence of the bank and generate regulatory uncertainty for industry.”
Tech giants, however, paint themselves as being just facilitators of payments, with Apple previously arguing that it has a “limited and indirect role in the payment process” and therefore should not be subject to the same stringent rules as banks and other payment providers.
The Tech Council of Australia, which represents Big Tech, agrees, arguing that “focusing on the function and purpose of financial services, rather than specific products, increases customer choice as well as promotes competition for providers that meet the same regulatory standards.”
Payments innovators, however, welcome reforms that, Fintech Australia said in its submission on the exposure draft, “will allow the RBA and treasurer to regulate a broader range of payment systems and participants within them to create a more level playing field.”
Making digital payments safe
The new legislation follows similar efforts in jurisdictions like the European Union to reform payment regulations around digital payments, including a mooted digital Euro central bank digital currency (CBDC) – something about which the RBA has long been sceptical.
The RBA has long favoured self-regulation amongst financial providers, “only intervening where the industry is unable to address a public interest concern,” it says, meaning it has “imposed regulation in a relatively narrow range of payments system activity.”
Payment systems must, the RBA expects, be financially safe for use by participants, efficient, competitive, and not “materially causing or contributing to increased risk in the financial system” – a definition that left mobile wallets untouched when they were relatively novel.
With RBA payments data showing Australians made over $20 billion worth of payments in October alone – and trends suggesting further increases when the RBA this year updates its triennial consumer payments survey – the ABA wants to see a less hands-off approach.
“These reforms can be passed this sitting fortnight,” Bligh said, calling it “imperative that these payments are captured within the regulatory framework… to provide the necessary customer protections.”
