Australia unveils draft legislation for e-payments

The Australian government has revealed its intentions to introduce legislation that would empower the central bank, the Reserve Bank of Australia (RBA), to regulate digital payment providers. At present, digital wallet services like Apple Pay, Google Pay, and WeChat Pay operate outside Australia’s financial regulatory framework because they are not designated as payment systems.

By enacting these proposed regulations, the RBA would gain the authority to oversee digital wallet payments similarly to how credit card networks and other transactions are monitored. This shift would also enable the Treasurer to instruct regulators to assess whether any payment platforms pose risks to the country. The government’s primary objectives are to address the risks associated with unregulated digital payment services, safeguard consumer interests, foster competition, and promote innovation in the financial sector.

Treasury documents indicate that the draft legislation would expand the definitions of payment systems and participants in Australia’s existing laws to better align with the evolving financial landscape. This adjustment is deemed necessary as the infrastructure and regulatory framework have not kept pace with the recent changes in finance. The Australian Banking Association reported a significant shift in payment preferences, with mobile wallet transactions surging from 29.2 million in 2018 to 2.4 billion in 2022.

However, major players in the digital wallet sector, such as Google and Apple, are opposed to being designated as payment providers by the government. They argue that customers primarily use their phones to make payments with cards issued by banks. Apple, in particular, declined to comment on the draft law but referenced a submission from July 2023, in which the company expressed the view that any reforms should be proportionate to the limited and indirect role digital services play in the payment system.

The Australian government has solicited feedback from stakeholders on the draft legislation, with the regulations expected to be introduced in parliament later this year.

In recent years, Australia has witnessed a significant shift in payment methods. Cash, which was the dominant payment method less than a decade ago, has seen a decline, partly influenced by the COVID-19 pandemic. Debit and credit cards, as well as digital wallets and mobile payments, have gained prominence. The digital payment market in Australia is expected to continue expanding, driven by digital commerce and mobile point-of-sale segments. Services like Apple Pay and Afterpay have become increasingly popular for in-store and restaurant payments, reflecting Australians’ growing acceptance of alternative payment methods.

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