Government makes moves to modernise payments system
Draft legislation has been released aimed at addressing the risk posed by new digital payment services.
The government has released draft legislation which will amend the Payment Systems (Regulation) Act 1998 to update the definition of ‘payment’ and ‘payments systems’ to capture new payment methods that are widely used today, as well as those that may emerge in the future.
The amendments will ensure the Reserve Bank of Australia can regulate new and emerging payments systems, such as digital wallet providers.
It will also introduce a new Ministerial designation power that would allow particular payments services or platforms that present risks of national significance to be subject to additional oversight by regulators.
In a public statement, Treasurer Jim Chalmers said the changes would address the risks posed by the new digital payment services, which are currently unregulated, to protect customers, promote competition and spur innovation.
“The Plan sets out a vision for a modern, world class and efficient payments system that is safe, trusted and accessible, enabling greater competition, innovation and productivity.”
The Explanatory Materials noted that the final report of the Review of the Australian Payments System (Payment Systems Review) found that the RBA’s existing regulatory powers under the Payment Systems (Regulation) Act 1998 (PSRA) may not adequately capture the full suite of systems and participants within the payments ecosystem.
The Review also noted the limits to the RBA’s powers under the public interest test and recommended the creation of a Ministerial designation power based on the national interest, to ensure emerging payment issues which fall outside of the scope of public interest can be addressed.
The Review also found that the existing definitions of ‘payment system’ and ‘participant’ in the PSRA were not sufficient to capture sections of the broader payments system ecosystem.
“This limitation could constrain the ability of the RBA to respond to risks to financial stability, efficiency or competition posed by new innovations in the payments ecosystem,” the EM said.
The current definition of payment system is limited to, among other things, a system that facilitates the circulation of money, the EM said.
“This means that payment systems that facilitate payments in non-monetary digital assets or that provide services which facilitate a payment being made cannot be considered a payment system under the PSRA,” it said.
Under the new laws, the definition of ‘payment system’ will cover a broader set of arrangements, including payment systems that use non-monetary digital assets for payments or provide services that facilitate a payment being made, and ‘three party’ or ‘closed loop’ systems.
“A closed loop system refers to a system that consists only of multiple bilateral arrangements between an entity and the payers and payees which use that system, with no interactions between the payers and payees,” it said.
“A three party system refers to where one entity – a card scheme – performs both the acquirer and issuer roles. For example, American Express and Diners Club both currently operate through a three party system. Both kinds of system will be capable of meeting the updated definition of ‘payment system’.”
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