Digital Wallets Like Google, Apple Pay to Be Regulated by Reserve Bank

An iPhone is used to make an Apple Pay purchase at The Post Office in London, England, on July 14, 2015. Peter Macdiarmid/Getty Images

The Australian government is one step closer to imposing regulations on digital payment services, such as Apple Pay and Google Pay, amid the push for the digitalisation of the country’s payment system.

On Oct. 11, the federal government released a draft legislation that expanded the power of the Reserve Bank of Australia (RBA), allowing it to regulate new and emerging payment systems.

The legislation (pdf) also introduced a new ministerial designation power, enabling the minister in charge to impose additional oversight on payment services or platforms that posed significant national risks.

It comes following a government review indicating that the RBA’s existing regulatory powers may not adequately cover the full suite of systems and participants within the payments ecosystem.

The move is the Labor government’s latest effort to implement a strategic plan (pdf) to “modernise” Australia’s payment system.

In June, the government announced that it would completely phase out cheque usage no later than 2030.

This has prompted commercial banks to accelerate their digitalisation process, with Macquarie Bank being the first to implement a total ban on cash and cheque deposits and withdrawals.

New Changes

Under the proposed legislation, the definitions of “payment system” will be expanded to include those that use non-monetary digital assets for payments or provide services that facilitate a payment being made (such as mobile wallets like Samsung Pay, Apple Pay, etc.).

Similarly, the definition of “participant” will now include all entities involved in the payment value chain, including those with or without a direct relationship to a payment system, instead of entities that are formal members of a designated payment system under current laws.

The above changes will allow the RBA to impose an access regime, determine compliance standards, and give directions to digital payment services.

At the same, the new legislation will grant new power to the minister in charge, allowing them to nominate an entity to perform regulatory powers and functions concerning a designated payment system.

It will also provide a civil penalty framework and increase existing maximum criminal penalties in accordance with the seriousness of the misconduct.

A person shows the "Samsung Pay" system in Barcelona, Spain, on Feb. 27, 2017. Lluis Gene/AFP via Getty Images

The government said the new laws would address the risks posed by new digital payment services, protect consumers, as well as promote competition and innovation.

“As payments increasingly become digital, our payments system needs to remain fit for purpose so that it delivers for consumers and small businesses,” Treasurer Jim Chalmers said.

“We want to make sure the shift to digital payments occurs in a way that promotes greater competition, innovation and productivity across our entire economy.”

Pushback From Tech Companies

Meanwhile, technology companies like Apple and Google have been pushing back against the changes.

In August, Apple said Labor’s plan to regulate its payment services was a dangerous move and could risk undermining technological innovation.

In submissions to the Treasury, the company argued that its payment platform did not pose financial and operational risks to banks and played a limited role in the country’s payment system.

Apple also stated that it did not provide financial services in Australia and thus should be exempted from regulations.

“Apple does not issue debit, credit or prepaid cards in Australia, nor does Apple acquire, process, authorise or execute transactions,” it said, reported the Financial Review newspaper.

“Apple is neither an issuer nor an acquirer for existing regulated payments systems, and at no point does Apple handle a payer’s money or have any control over any payments or transfer of value.

“Apple Pay does not store any details of a cardholder’s existing debit, credit or prepaid card and does not have access to a user’s account to determine whether funds are available or store any value or funds.”

According to government data (pdf), 25 percent of Australian card transactions are currently made through mobile wallets, and each consumer makes around 650 electronic transactions annually.

In addition, around one billion transactions were processed via the New Payments Platform in 2021-22.