All the regulators outlined above play a role in relation to payments.i Overview
The primary day-to-day payment methods are currently physical currency, cards, cheques and electronic funds transfers. Australian Payments Network Ltd (AusPayNet), a corporation owned by payment system participants, coordinates the clearing and settlement of payments by cheque, direct entry payments, ATMs, debit cards and high-value payments. The major card payment schemes and the BPAY system for the payment of bills operate with their own membership and rules independently of AusPayNet. The domestic card system is managed by eftpos Payments Australia Limited. The New Payments Platform (NPP), operated by NPP Australia Ltd, commenced operation in 2018, allowing near instantaneous direct electronic funds transfers.Licensing requirements
Providers of facilities by which persons can make non-cash payments must hold an AFSL authorising them to provide such a facility. However, there are exemptions from this requirement – including for providers of facilities used to make payments to one person only, loyalty schemes, road toll payment facilities, low value (i.e., up to A$1,000) non-cash payment facilities, gift card, scheme facilities and prepaid mobile facilities. Electronic funds transfer facilities offered by ADIs are deemed not to be financial products by the Corporations Regulations and so do not require an AFSL to provide to consumers.
The PSR Act does not itself impose any licensing scheme. It allows the RBA to designate a payment system and impose access regimes and standards if it considers it to be in the public interest. The payment systems that have currently been designated and that have had standards or access regimes imposed on them are identified in Section II.i, under the subheading 'Payment systems'. The ATM system is also designated and subject to an access regime.
Standards issued by the RBA govern (1) interchange fees in Mastercard, Visa, American Express and EFTPOS credit card and debit card schemes – interchange fees for credit card transactions must not exceed 0.8 per cent of the value of the transaction and interchange fees for debit card transactions must not exceed A$0.015 per transaction or 0.2 per cent of the value of the transaction (depending on whether a fixed fee or proportion of value is charged); and (2) merchant pricing – merchants are prohibited from imposing surcharges for card transactions greater than their cost of acceptance for those card transactions.
Otherwise, the scheme rules of each payment system function as a contract between members of that payment system and between each member and the operator of the payment system.PPF as a banking business
If a payment product is likely to be a PPF under the PSR Act, two regulatory issues are raised:
- the PPF may be a banking business under the Banking Act and Banking Regulations. A provider of a PPF may only engage in 'banking business' if it is an ADI regulated by APRA; and
- the holder of stored value (as defined by the PSR Act) that makes payments in relation to a PPF that has been determined to be a banking business must be an ADI or authorised or exempted from the requirement to be an ADI before it can be the holder of the stored value.
A PPF is a facility (other than cash) in relation to which the following conditions are satisfied:
- the facility is purchased by a person from another person;
- the facility is able to be used as a means for making payments up to the amount that, from time to time, is available for use under the conditions applying to the facility; and
- those payments are to be made by the provider of the facility or by a person acting under an arrangement with the provider (rather than by the user of the facility).
A PPF will be a 'banking business' if APRA determines that the facility:
- is of a type for which the purchaser of the facility is able to demand payment, in Australian currency, of all, or any part, of the balance of the amount held in the facility that is held by the holder of the stored value; and
- is widely available as a means of payment, having regard to:
- any restrictions that limit the number or types of people who may purchase the facility; and
- any restrictions that limit the number or types of people to whom payments may be made using the facility.
If a PPF falls within Declaration No. 2 2006 regarding Purchased Payment Facilities (the PPF Declaration), the provider will not be required to become an ADI. The PPF Declaration states that the PSR Act does not regulate facilities where the total amount of obligations to make payments does not exceed A$10 million or the number of people to whom payments may be made using the facility does not exceed 50 people.
A PPF provider is a special kind of ADI. It must only conduct 'banking business' as specified in Regulation 6 of the Banking Regulations. It cannot hold out that it is a fully authorised ADI. Its business activities are restricted to PPF business operations and closely related services and must be incorporated in Australia (unless APRA determines otherwise). It must also provide APRA with financial data on periodically as specified in its ADI authority.ePayments Code
The ePayments Code includes consumer protections exceeding those found in legislation, including:
- at least 20 days' advance written notice of changes to the terms and conditions of the facility that may be adverse to the consumer;
- no liability for the consumer as a result of an unauthorised transaction occurring after the consumer informed the provider that a device used to make payments (e.g., a card) has been misused, lost or stolen or that the security of a passcode has been breached; and
- requiring their ADI to investigate and take steps to recover internet payments made mistakenly by the consumer, and to cooperate with other ADIs in recovering mistaken payments for their customers.
While the ePayments Code is voluntary, it gains legal force by being incorporated into the contracts between the payment facility provider and the consumer.ii Recent developments
NPP Australia Ltd, a company formed and owned by the major ADI participants in the payments system, had been developing the NPP payment system since 2014. The NPP is intended to enable consumers, businesses and government agencies to make simply addressed payments in real time, with the continuous availability of the payment system. The material differences between the NPP and the current direct entry system are:
- speed – the NPP provides near instantaneous settlement;
- continuous availability – the NPP is available all day, every day (as opposed to settlement only during business hours);
- data capability – the NPP enables more information to be sent with payments; and
- simple addressing – payers are able to address payments to recipients by a unique, commonly known identifier, such as a mobile phone number or email address. This new form of identification, which is called PayID, is expected to facilitate more consumer-to-consumer payments by simplifying identification requirements.
The NPP became publicly available in 2018.