Our #Bitesize round-up of key recent FinTech and payments developments in Australia covers: the Reserve Bank’s publication of conclusions from the Review of Retail Payments Regulation; the final report on Mobile Payment and Digital Wallet Financial Services; and the final report of the Senate Select Committee on Australia as a Technology and Financial Centre.
Reserve Bank publishes its conclusions from the Review of Retail Payments Regulation
On 22 October 2021, the Reserve Bank of Australia (RBA) released its Review of Retail Payments Regulation. The conclusion paper sets out the Reserve Bank’s various policy frameworks, together with amendments to the Bank’s standards for card payment systems, which the Reserve Bank states ‘will contribute to a more efficient and competitive payments system’.
The main policy measures include:
- All debit card issuers with more than 1 per cent of the total value of debit transactions will be expected to continue issuing dual-network debit cards (DNDCs). Based on 2020 data, this expectation will apply to eight issuers, which together account for around 90 per cent of all debit card transactions.
- For these issuers, both card schemes on their DNDCs should be provisioned in all form factors, including mobile wallets (where the functionality is supported by the relevant schemes and mobile-wallet providers). The Bank has begun engaging with mobile-wallet providers that do not currently support the provisioning of both networks on DNDCs to encourage them to do so.
- All acquirers and payment facilitators providing card acceptance services to merchants are expected to offer and promote least-cost routing (LCR) functionality to merchants in the device-present (in-person) environment.
- Transparency around interchange fees.
- In the device-not-present (online) environment, all acquirers, payment facilitators and gateways will be expected to offer and promote LCR functionality to merchants by the end of 2022. The Bank expects the industry to follow a set of principles regarding the implementation of LCR in the online environment.
- The Bank will also implement new initiatives to further improve the transparency of payment costs for merchants, to help reduce some impediments to competition in the acquiring market for smaller merchants.
- ‘Buy now, pay later’ providers should remove their no-surcharge rules, consistent with the Board’s longstanding position on such rules. Given the complexity of the regulatory issues, the Bank will continue engaging with the Treasury on regulatory approaches.
- There will also be a reduction in the cap on debit (and prepaid) interchange fees that are set in cents terms from 15 cents to 10 cents.
- Schemes will be required to provide the Bank with access to their scheme fee schedules and all scheme rules, and to notify the Bank promptly of any changes to these. Schemes will also be required to provide to the Bank quarterly data on scheme fee revenue and rebates.
The RBA’s media release is available here.
The Review of Retail Payments Regulation is available here.
The 22 October RBA announcement is available here.
The Farrell Review is available here.
Mobile Payment and Digital Wallet Financial Services Final Report
The Parliamentary Joint Committee on Corporations and Financial Services published its final report into Mobile Payment and Digital Wallet Financial Services. 14 recommendations were made:
- Treasury should enhance its skills, capacity, and expertise in the payments space to become more proactive in developing policy and exhibiting leadership.
- The Australian Government should task the Treasury with legislative change to enable financial regulators to regulate stored-value facilities in-line with recommendations made by the Council of Financial Regulators.
- The Australian Payments Network should voluntarily provide quarterly aggregated information on non-compliance among its members to relevant regulators.
- Treasury should consult with regulators and industry on the effectiveness of payments system self-regulation and table in Parliament by the end of 2023 a review that outlines any gaps in the current self-regulatory model.
- ASIC should continue to monitor the ePayments Code and ensure the Code is updated as and when necessary, and provide recommendations to government on whether and how to expand the Code to payment platform providers.
- The Australian Finance Industry Association should continue to monitor the effectiveness of the Buy Now Pay Later Code of Practice and ensure the Code is updated as and when necessary
- ASIC should be given the power to make the ePayments Code mandatory for all industry participants.
- The definition of a ‘payments system’ within the Payment Systems (Regulation) Act 1988 should be expanded to encompass new and emerging payments systems and platforms, in keeping with the findings of the Treasury Payments System Review.
- Treasury should consult with relevant agencies to provide policy advice on the merits of regulating payment platform providers as participants in the payments ecosystem, including:
- setting out the laws to which these providers are already subject;
- detailing the specific regulatory gaps that exist today or may emerge in the future; and
- providing advice on the best ways of including payment platform providers within existing payment system regulation.
- The ACCC investigation into Apple’s restrictions on direct third party access to the chips that enable mobile payments on its devices should consider:
- consumer harms and benefits;
- the impact on competition and innovation;
- the extent to which similar practices exist in other sectors and industries; and
- whether developers have practical and viable alternatives to using Apple Pay to process mobile payments.
- The Treasurer should direct the ACCC to conduct an in-depth examination of the merits of different regulatory and technological approaches to enabling least-cost routing on mobile transactions, including the merits of consumers retaining the ability to route transactions over their preferred network if they choose to do so.
- Payment systems should make their fee structures more transparent to consumers, merchants, and regulators.
- The Committee should consider an inquiry into the Buy Now Pay Later industry 18 months after the industry Code of Practice came into effect.
- ASIC should regularly update its Moneysmart website to ensure it appropriately captures changes in the payments sector.
The report is available here.
Final report of the Select Committee on Australia as a Technology and Financial Centre
On 20 October 2021, the Senate Select Committee on Australia as a Technology and Financial Centre produced its Final Report which supplements the Committee’s recommendations in its first two interim reports.
The issues the Committee considered in the final report included:
- Regulation and taxation of cryptocurrencies and digital assets;
- Issues relating to de-banking of Australian FinTechs and other companies;
- The policy environment for neobanks in Australia; and
- Options to replace the Offshore Banking Unit.
The report makes concrete recommendations for a new form of markets licence for digital currency exchanges, custody and depository requirements for digital assets and a review of the AML/CTF laws to ensure they are fit for purpose.
While the Final Report recommends that the different kinds of tokens are reviewed under the various regulatory regimes, it stops short of mandating a new class of ‘digital assets’ for regulation in that way that other international regimes have done.
The Committee’s final report is available here.
Herbert Smith Freehills’ article about the final report is available here.
Herbert Smith Freehills’ article about the Committee’s second interim report is available here