New Submission - Payments Licensing

FinTech Australia has made a submission to Treasury in response to their consultation on a Payments System Modernisation (Regulation of Payment Service Providers) Proposals Paper.

The Paper sets out to implement a new licensing framework for payment service providers leveraging the existing Australian Financial Services framework for regulating Payment Service Providers (PSPs). This process follows from the first consultation back in June which sought feedback on a proposed list of payment functions to be licensed.

Over the last two decades, fintech has emerged as a driver of innovation, competition and lower costs in payments. Payment service providers are the largest fintech segment, with our 2023 EY FinTech Australia Census finding that around a third of Australian fintechs are in payments. The payments system also touches every fintech, whether it is a wealthtech, insurtech, lender, digital currency exchange or Consumer Data Right intermediary. However, the emergence of innovative payment service providers (PSPs) and fintechs has also exposed the limitations of a payments regulatory framework designed for a different time.

FinTech Australia strongly supports the overarching objective of the proposals in the paper to streamline and modernise licensing for payment service providers and provide a clearer regulatory pathway for participants across the payments ecosystem. The focus on targeting risk and tiering obligations is key to ensuring that the payments regulation creates a level playing field across the fintechs, traditional financial service providers and other technology service providers.

While members agree with the overall direction of the proposed reforms, they also remain concerned about some of the definitional and practical implementation issues which could inhibit the new framework’s effectiveness in delivering the long-awaited goal of a modern, fit-for-purpose payments system which enables and supports financial innovation and competition in Australia.

Our submission provided feedback and recommendations on:

1. Proposed functions and obligations

2. Incorporating functions into law

3. Exclusions and exemptions

4. Licencing Processes

5. Financial services obligations

6. Regulatory framework for Stored Value Facilities

7. Common access requirements

8. Industry standard-setting framework

9. ePayments Code

10. Transitional arrangements

We look forward to continuing to engage as these proposals develop and evolve into consultation on draft legislation.

You can view our full submission here