Local fintechs have welcomed proposed reforms to Australia’s payments “outdated” system, but say swift action is needed to fix regulations that are up to a decade behind those in global financial hubs countries.
The sector says it has already been two years since the former Coalition government completed a review of the Australian Payments System and that the changes are needed to foster fintech innovation.
On Wednesday, Treasurer Jim Chalmers launched the Strategic Plan for Australia’s Payments system and two consultation papers to inform reforms to underlying regulations.
Speaking to the Australian Banking Association, Mr Chalmers said that “aligning payments reform with other parts of our agenda for the digital economy including the Consumer Data Right, Digital ID, skills, and AI agendas”, would improve competition, innovation, and productivity.
The release of the strategic plan and another round of consultations comes six months after an initial consultation paper on the plan was completed, with key priorities largely the same.
The first consultation paper outlines proposed reforms to the Payments Systems (Regulation) Act 1998 (PSRA) to enable the Reserve Bank of Australia to regulate new and emerging payment systems, such as digital wallet providers, and a ministerial designation power that would confer additional oversight by regulators upon “particular payments services or platforms that present risks of national significance”.
Melbourne-based Airwallex’s director of strategy Amelia Hamer urged swift action after waiting two years for the reform process to reach this stage.
“Many of the regulations under which we operate were written in 1998 at a time when the internet barely existed, let alone the concept of a fintech,” she said.
“Australia is already as much as 10 years behind the United Kingdom and Singapore in delivering a fit-for-purpose regulation system for payments businesses.”
Ms Hamer said that the current system is anti-competitive, which has “entrenched the power of the banks to continue excessive charging and under-servicing Australian businesses and consumers”.
“That’s meant capital and skills shifting to other markets, higher costs for Australian businesses, and ultimately less money in their coffers to train Australian staff and keep prices down for Australian consumers,” she said.
FinTech Australia general manager Rehan D’Almeida also expressed that fintechs “have been waiting years for these reforms to payments licensing to progress since they were first recommended in the Payments System Review”.
“Although this announcement will be made to a room full of banks, at a banking conference, we hope the crucial role of fintech companies in shaping the future payments system will be recognised as these important reforms progress,” Mr D’Almeida said
“Payments providers are one of the largest fintech segments, accounting for 38 per cent of Australian fintech companies according to the latest FinTech Census.”
Mr D’Almeida also highlighted that the currently regulatory system has diminished competition in the payments sector.
“Historically these regulations were not fit-for purpose as they rigidly restrict access to payment systems, meaning competition is slowed and innovation is frozen out. This latest framework rectifies this, giving a clear direction to the sector’s regulators, RBA, APRA and ASIC, to allow for fair and equitable access to payment systems for compliant fintechs companies.”
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