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Australia’s payments ecosystem is of fundamental importance to Australia’s economy and society, supporting around 55 million payments worth up to $650 billion each day. The system is highly complex and is evolving rapidly. New platforms and technologies are changing the ways in which consumers and businesses transact. The growth of mobile payments has been particularly rapid against the backdrop of the COVID-19 pandemic, and is predicted to become the most popular contactless way for Australians to pay by the end of 2021.

These changes are disrupting the position enjoyed by many of Australia’s major banks and financial institutions that have traditionally been at the centre of the payments system. A growing number of powerful multinational technology firms (like Apple, Google, and others) are playing increasingly central roles within Australia’s payments architecture–often with little regulatory oversight. The global reach and market dominance of these so-called ‘fintechs’ has at times left domestic partners looking to use their platforms and services with little influence and few opportunities to negotiate favourable agreements.

Recent changes to the payments ecosystem have uncovered gaps and inconsistencies in the current regulatory framework. Much of the existing legislation governing the payments space is predicated on outdated structures and systems. Moreover, the effectiveness of the multitude of regulators covering the payments ecosystem has been undermined by outdated concepts of what constitutes a payment platform or service. These gaps have allowed some of the most important players in the system to operate beyond the reach of our regulators.

The fundamental importance of the payments ecosystem, the speed and scale of recent changes, and the regulatory gaps that have emerged, mean Australia does not have the luxury of watching and waiting as developments unfold. Instead, this report recommends government urgently develop proactive policy and implement legislative and regulatory change. In particular, the committee recommends the Treasury report to Parliament on gaps in the current self-regulatory model and provide policy advice on the merits of regulating payment platform providers as participants in the payments ecosystem. The committee also calls for the definition of a payments system within key regulations to be expanded to encompass new and emerging payments technologies and platforms.

Throughout this inquiry, evidence before the committee suggested the rapid evolution of Australia’s payments ecosystem is likely to continue. It is therefore critical that our legislation, regulators, and regulatory approaches are nimble and flexible enough to adapt to the future of the sector–whatever it looks like. Ensuring this flexibility will require first, that legislation and regulations are updated to become as technology-neutral as possible, rather than wedded to particular ideas of how and what constitute payment platforms and systems. Second, new powers should be vested in the government to allow it to designate firms as participants in the payments system to ensure they fall under existing legislation and that regulations keep pace with practice.

Report structure:

  • Chapter 1: an introduction to the inquiry, including its terms of reference, the conduct of the inquiry, and key terms used throughout the report;
  • Chapter 2: an overview of the payments ecosystem, outlining both old and new payment rails;
  • Chapter 3: an overview of the technologies that enable digital wallets and mobile payments, and details of the major platforms and services offered in Australia;
  • Chapter 4: details of the regulatory environment in Australia as well as jurisdictional comparisons;
  • Chapter 5: competition issues related to mobile payments and digital wallets, including market dominance, app store terms and conditions, and third party access to the near-field communication chip on mobile devices; and
  • Chapter 6: other issues related to fees, security and risk, consumer protections, financial inclusion and accessibility, and cross-border payments and remittances.
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