Treasury is seeking feedback on two proposed payments system reforms, including a second consultation on the previously mooted introduction of a new licensing framework for payment service providers (PSPs) as well as a winding down of Australia’s cheque system.
The proposed payments licensing framework seeks a more consistent and apposite regulation of PSPs, expanding the Australian Financial Services Licence (AFSL) framework to regulate these providers.
PSPs, which are also known as merchant service providers, are third party entities that facilitate payments – from cards or from bank-to-bank – between customers and merchants. This also includes a range of stored-value facilities for emerging digital currencies, including stablecoins.
The proposed legislative change aims to create a more level playing field for non-authorised deposit institution (ADI) payment service providers, addressing some of the regulatory uncertainties and barriers that many PSPs currently face when entering the Australian payments market, whilst also ensuring these payments faciliatators effectively manage risks to payments users.
The consultation, for instance, calls on stakeholders to comment on whether current AFS obligations are fit for purpose for PSPs, or whether these providers should have additional or tailored risk management obligations based on the activities they perform.
The proposed rule changes would see PSPs that hold customers’ funds subject to additional obligations, with Treasury seeking to determine, for instance, whether APRA-regulated PSPs would be subject to the standard AFSL client money obligations.
The Government is also consulting on powers to enable the introduction of a revised mandatory ePayments code, which would provide more robust protections for PSP consumers.
The framework includes a new pathway for payment service providers to directly access payment systems and an industry standard‑setting framework to align core standards.
The newly released payments systems reforms consultation follows a June 2023 consultation that sought feedback on a proposed list of payment functions to be licensed.
The Government intends to introduce legislation for the payments licensing regime in 2024.
A second consultation paper, released on the same day by Treasury, has sought industry feedback on the Federal Government’s proposal for a staged wind down of Australia’s cheque payments system, which would see the end of cheque use by 2030.
The feedback would ensure the Government “understands the opportunities and challenges of transitioning away from the cheques system in a smooth and orderly manner”.
“Feedback will help determine the best path forward so that adverse impacts to consumers and businesses are minimised,” the Government said.
Financial services minister Stephen Jones said the proposed changes would “make our payments system more seamless, safer and stronger, and suitable for the times”.
“Whether it’s cheques, payment cards, digital wallets or cash, a competitive and efficient payments system is essential to support the business of everyday Australians.”
Responses to the consultations can be submitted until 2 February 2024.
