Australia Set to Regulate Digital Wallet Providers

The Australian government has announced plans to introduce legislation that would give the Reserve Bank of Australia (RBA) the power to regulate digital wallet providers, such as Apple Pay and Google Pay. As it stands, these providers are not classified as payment systems, which exempts them from Australia’s financial regulatory system.

Expanding Regulatory Reach

The proposed legislation would allow the RBA to oversee digital wallet transactions in the same way it monitors credit card networks and other transactions. It would also grant authority to the treasurer to instruct regulators to investigate whether any payment platforms pose a risk to the nation. The move is seen as a means of addressing the risks associated with new digital payment services, which are currently unregulated.

Treasurer Jim Chalmers stated that the initiative aims to protect consumers, foster competition, and stimulate innovation. The draft law would broaden the terms “payment system” and “participant” within Australia’s existing laws, according to treasury documents.

Catching Up With the Digital Economy

The current payments infrastructure and regulatory framework have struggled to keep up with the rapid transitions in finance, particularly in Australia’s digital economy and payments sector. A report from the Australian Banking Association in June highlighted a “phenomenal shift” in payment preferences. Mobile wallet transactions in the country have surged to 2.4 billion in 2022, up from 29.2 million in 2018.

Opposition from Tech Giants

Tech giants Google and Apple have opposed the government’s move to classify them as payment providers. They argue that customers only use their phones to utilise cards issued by banks to make payments. Apple has declined to comment on the draft law, pointing to a submission it made to the treasury in July, where it argued that any reforms should be proportionate to the limited, indirect role digital services play in the payment system. Google has not yet responded to requests for comment.

The government is currently seeking feedback from stakeholders on the draft legislation until Nov. 1. The legislation is slated to be introduced to parliament later this year.