15/12/2022The Treasury has released a consultation paper seeking...

15/12/2022

The Treasury has released a consultation paper seeking input into the Government’s Strategic Plan for Australia’s Payments System (Consultation Paper). The Consultation Paper refers to emerging payments trends as the backdrop for future reform, including:

• Changing payment methods: Electronic payments continue to outstrip demand for cash and cheque based payments, with an increasing preference for debit cards over credit cards.
• New technology: New technology is strengthening payments systems around the world. The New Payments Platform (NPP) now processes over 25% of total account to account payments.
• New providers and business models: New business models (eg, BNPL) and participants (eg, fintechs and big techs) are challenging the traditional definition of payments.
• New risks: New risk profiles associated with emerging payment technology is attracting greater industry and regulator focus.

Australia’s Payments System reform agenda

The Government has undertaken a range of reviews in recent years relating to Payments System reforms, including the Council of Financial Regulators’ Stored Value Facility Review, the Treasury Payments System Review (Treasury Payments Review), the Senate Select Committee on Australia as a Technology and Financial Centre and the Parliamentary Joint Committee Inquiry into Mobile Payments and Digital Wallets. Various recommendations in these reviews received endorsement from the Government and informs its Payments System reform agenda. This agenda includes (among other things):

• developing a Strategic Plan for the Payments System in collaboration with regulators, industry, consumer and business representatives;
• updating the Payment Systems (Regulation) Act 1998 (Cth) (PSRA) to capture the full suite of payment entities and systems, as well as provide the Treasurer with ministerial powers to address payment issues outside the scope of the Reserve Bank of Australia’s (RBA) public interest powers;
• implementing a tiered licensing framework for payment service providers;
• reducing small business transaction costs, particularly through least cost routing (LCR);
• continuing development of international interoperability through cross-border initiatives; and
• considering developments in the broader digital economy, such as digital wallets, BNPL, stablecoins, crypto assets, central bank digital currencies (CBDC), the consumer data right (CDR), and connecting with payment related initiatives in various States.