The biggest review of Australian payments regulation in more than 20 years says the government should have the power to set rules for new forms of payment such as Apple and Google’s digital wallets, which could become systemically important players in finance.
Banks and fintechs on Monday backed the landmark review that said Australia’s current system of payment regulation lacked a clear vision, as the sector grapples with rapid growth in new types of digital payment.
In response, the review said the federal Treasurer should be given new powers to intervene in payments systems, based on national interest criteria such as cybersecurity, crisis management, or consumer protection.
The payments system review, by King & Wood Mallesons partner Scott Farrell, also called for the Reserve Bank’s powers to regulate payments to be bulked up, and for a simplified licensing regime.
As an example of how payments are changing rapidly, the review highlighted the rapid growth in digital wallets –apps that allow customers to use smartphones to make payments – provided by Apple, Google and WeChat. It said digital wallets could become “systemically important” if their growth continued, and while the apps held huge amounts of consumer data they were not subject to payment regulation.
While the report did not actually recommend regulating Apple Pay, Treasurer Josh Frydenberg on Monday appeared to signal the government’s support for changes to the payment regulatory regime, and he highlighted the rise of digital wallets.
“Ultimately, if we do nothing to reform the current framework, it will be Silicon Valley alone that determines the future of our payments system, a critical piece of our economic infrastructure,” Mr Frydenberg wrote in The Australian Financial Review.
Banks, which have highlighted the threat they face from unregulated “big tech” players, also backed Mr Farrell’s report.
The Commonwealth Bank, which has recently engaged in a public fight with Apple over its market power in digital wallets, said the report underscored the need for a system that encouraged competition. “The Farrell Report provides a well-considered and comprehensive review of the current payments system which indicates there is broad agreement the system needs to be significantly re-shaped to incorporate the rapid changes underway in payments in Australia and globally,” a CBA spokesman said.