Treasurer Jim Chalmers has introduced significant reforms to modernise the regulation of payment systems in Australia.
These reforms, which are the most substantial in over twenty-five years, recognise that payments providers extend beyond traditional banks. Regions require a more comprehensive arsenal of tools to protect users in this massive system.
The payments landscape in Australia is rapidly evolving. Technology companies, rather than traditional lenders, are increasingly facilitating these transactions. Notable players in this space include global giants like Apple, Google and Australia’s own buy now, pay later providers such as Afterpay and Zip.
Treasurer Jim Chalmers has announced three major payment initiatives to address these changes as part of the Federal Government’s agenda.
The first initiative is the Strategic Plan for the Payments System. This plan entails phasing out the Bulk Electronic Clearing System (BECS) and fully transitioning to the New Payment Platform (NPP), which is a safer and more productive system. By embracing the NPP, the government aims to build a digital economy and reduce reliance on traditional payment methods like cheques.
The second initiative involves reforming the payments regulatory architecture. This reform includes expanding the mandate of the RBA, which will play a crucial role in overseeing and ensuring the payment system’s integrity, stability, and competitiveness. The regulatory framework will be updated to adapt to the changing landscape and address the unique challenges technology-driven payment providers pose.
The third initiative under consideration is the introduction of a new Payments Licensing regime. This regime would require payment providers to obtain licenses and adhere to certain standards and consumer protection measures. The government aims to create a more transparent and accountable ecosystem, where payment functions subject to regulation are clearly defined and monitored.
The Australian government aims to create a more resilient and efficient payment system through these reforms. The reforms seek to enhance consumer protection, foster innovation, and promote a digital economy that benefits all Australians. By embracing technological advancements and accommodating non-traditional payment providers, Australia is positioning itself for the future of payments.
Airwallex Director of Strategy Amelia Hamer said: “Businesses have been passing on the higher operating costs from Australia’s outdated payments system, which has been helping fuel the hip pocket pain Australians are feeling.
“While this is a welcome step from the Treasurer in what has already been a two-year process, we urge the Government to act swiftly.
“Many of the regulations under which we operate were written in 1998 at a time when the internet barely existed, let alone the concept of a fintech. Australia is already as much as ten years behind the United Kingdom and Singapore in delivering a fit-for-purpose regulation system for payments businesses.
“Australia needs a regulatory regime for the payments sector that works for small and medium businesses and consumers, not just the big banks.
“The current system is anti-competitive and outdated and has entrenched the power of the banks to continue excessive charging and under-servicing Australian businesses and consumers.
“That’s meant capital and skills shifting to other markets, higher costs for Australian businesses, and ultimately less money in their coffers to train Australian staff and keep prices down for Australian consumers.”
Australian Banking Association’s (ABA) CEO Anna Bligh expressed support for the Strategic Plan for the Payments System, stating that it will provide guidance for banks and the payments industry in their investments in future technology. Bligh emphasized the need for modernisation, noting that Australia is currently relying on a 60-year-old system for many consumer and business payments.
“With cheques now in steady decline and accounting for only 0.2 per cent of all payments, it’s time to have a smooth and well-planned process to phase out this form of payment. Australian banks will work with the Government to ensure that customers and businesses are ready for a gradual and orderly phase out.”
“Australia is currently operating under payments legislation that was created in 1988. The proposed changes announced today will help ensure clear consumer protections apply no matter who is processing your payment and that the security of customers’ personal and financial information is maintained.
“By giving the RBA greater oversight and standard-making powers over digital wallets and other forms of payments infrastructure, these regulatory changes can also help to maintain the security and efficiency of our payments system.”
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