Australian banks have called for an update on the payment laws that would empower the Reserve Bank of Australia (RBA) to regulate digital payment services, whose market share has skyrocketed in recent years. The Australian Banking Association (ABA) called on the country’s parliament to pass proposed amendments to the Payment Systems (Regulation) Act.
The Act was passed in 1998 and has not been updated since. It leaves banks heavily regulated while their digital counterparts enjoy massive regulatory flexibility. The aim is to enhance consumer protection and promote competition in the rapidly evolving fintech landscape.
The recommended regulations come as a response to the surging popularity of digital payments in the country. Recent data from the RBA revealed that Australians made over 500 million payments via mobile wallets in October 2024, totaling more than $20 billion. Industry leaders and analysts argue that outdated regulations must be updated to reflect the current payments ecosystem.
The legislative draft was initially announced in October 2023 and is expected to be introduced to parliament later this year. This is going to expand the definitions of “payment system” and “participant” in Australia’s existing laws. This expansion is expected to enable the RBA to monitor digital wallet payments similarly to credit card networks and other transactions. This will ensure the services adhere same standards and safeguard measures as traditional payment systems.
Jim Chalmers, a Treasurer highlighted the importance of modernizing Australia’s payment system to meet the current and future needs of the economy. The advised legislation aims to label, the risks imposed by currently unregulated digital payment services. It aims to protect consumers, promote competition, and spur innovation in the sector. The feature of the draft law is the introduction of a new Ministerial designation power. This will allow additional regulatory oversight of payment services or platforms that present risks of national significance.
This move elaborates the regulating digital payment services in a broader push for digital compliance transformation in Australia. In recent years country has witnessed a significant shift in payment preferences.
Mobile wallet transactions surged from 29.2 million in 2018 to 2.4 billion in 2022. The rapid adoption of digital payment methods has highlighted the need for a regulatory framework. This framework will keep pace with technological advancements while ensuring consumer protection within laws.
The regulations proposed are part of the government’s Strategic planning for Australia’s secure Payments System. it sets out a vision for a modern, world-class, and efficient payment system that is safe, trusted, and reachable for everyone.
This will ensure greater competition, innovation, and productivity across the whole economy. This will also reduce the risk associated with advanced payment technologies and methods.
The reaction of industries has been mixed about the proposed regulations. The Australian Banking Association has welcomed the move, CEO Anna Bligh stating that “with the ongoing surge in digital payments these transactions must be subject to the same oversight and consumer protection laws as the rest of the payments system”. Digital wallet providers, like Apple and Google, have shown opposition to being designated as payment providers. They argue that their role in the payment system is limited and indirect.
The landscape for digital payments in Australian regulations is complicated by existing laws and standards. The country already has strict data protection laws. These laws include the Privacy Act of 1988 and the Consumer Data Rights (CDR) legislation. These laws require explicit consumer consent for data collection and allow customers to safely share their data with certified businesses.
Financial institutions and designated services must comply with the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 (AML/CTF). It requires entities to establish and maintain programs to identify, mitigate, and manage the risks of money laundering and terrorism financing.
As Australia moves towards regulating digital payment services, businesses operating in the country need to adapt their strategies to ensure compliance. This will help in continuing to meet evolving customer expectations. Factors for businesses’ success in this new regulatory environment offer varied payment options, including cybersecurity measures, implementing customer identity verification processes, and integrating real-time payment systems.
The draft legislation moves through the consultation process and towards parliamentary consideration. stakeholders across various the financial services industry will be watching its development. The final form of the regulations and implementation will play a crucial role in determining how Australia’s digital payment ecosystem evolves in the coming years.
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