The Australian Council of Financial Regulators (CFR) today published an Issues Paper reviewing the regulatory regime of stored-value facilities including purchased payment facilities (PPFs). The CFR comprises regulators such as APRA, ASIC and the RBA.

PPFs enable funds to be stored for the purpose of making future payments and include mobile wallet services and prepaid cards. PPF providers must be licensed and supervised by APRA or otherwise rely on an exemption from complying with the legislative requirements. The RBA has declared several class exemptions for PPFs, including the “limited-value facilities” exemption for PPFs with payment obligations of $10 million or under.

To date, PayPal is the only entity licensed and supervised by APRA as a PPF provider and only one entity has obtained individual exemption from the RBA. These results support arguments that the current framework is too complicated, deters potential new entrants and imposes significant compliance costs.

Citing both technological developments since the introduction of the regulatory regime in the late 1990s and regulatory developments in overseas jurisdictions, the CFR is seeking views from stakeholders on a number of questions including in relation to:

  • the outlook for stored value facilities in Australia;
  • the definition and scope of stored-value regulation; and
  • appropriate regulatory approach to emerging products and services.

The CFR has also suggested that “medium sized” PPFs with stored value between $10 million and $50 million could be regulated by ASIC under the AFS licensing regime. This would enable the RBA to focus on regulating payment systems on a system-wide basis rather than on the regulation of individual PPFs.

We welcome the consultation from the CFR. Our Fintech clients have experienced difficulty in navigating this area due to the ambiguous wording of the legislation. We think that reform is necessary to enhance competition in the payments space and to further open up the Australian market to innovative offshore providers.

Stakeholders are invited to provide written submissions to the CFR by 19 October 2018 at svfsubmissions@rba.gov.au.