King Irving responds to Treasury’s Consultation Paper ‘Payments System Modernisation: Regulation of payment service providers.
In light of the fast evolving nature of the payments landscape, in June 2023 Treasury released a consultation paper on a proposed list of new payment functions to be regulated under the Australian Financial Services Licence (AFSL) regime.
Following consultation with stakeholders, Treasury released a second consultation paper, Payments System Modernisation: Regulation of payment service providers with an updated list of payment functions requiring AFSL coverage. The proposed approach involves two main changes to existing AFS licensing for payments, introducing a new class of both a financial product and financial services.
The existing financial product ‘makes non-cash payments’ is proposed to be replaced with the broader concept of ‘uses a payment product,’ including Stored-value Facilities, Payment Instruments (e.g. debit and credit cards), Payment Facilitation Services (e.g. merchant acquirers, payment facilitators and aggregators, domestic money transfer service providers) and Cross-border Transfer Services.
A new category of financial service is proposed to be added, ‘providing payment services’ covering the two new categories, Payment Initiation Services and Payment Technology and Enablement Services. Payment Initiation Services include PayTo services, recurring payments initiated by a third party and direct debit or credit services. Payment Technology and Enablement Services include passthrough digital wallets (such as Apple, Google and Samsung Pay) and payment gateways (like PayPal, Square and Amazon Pay).
The consultation paper also proposes that mandatory technical industry standards will apply to a broad range of participants and operators of payment systems, including the new AFS licensees. These standards will likely be set by an authorised standard-setting body (ASSB).
The Government intends to introduce legislation for the payments licensing regime later this year.
As AFS licensing experts, the team at King Irving will continue to be fully engaged with these proposed changes and keep you in the loop.
