🦘🦘🦘 Australia🇦🇺 unveils a comprehensive reform for the digital payments ecosystem

🦘🦘🦘 Australia🇦🇺 unveils a comprehensive reform for the digital payments ecosystem

After a five-year review process and extensive public consultations, Australia has finalized the first legislative package covering the core regulatory concepts and licensing obligations for the payments sector.

➡️ Updated definitions have been introduced for stored-value facilities (SVF), payment initiation services, and payment technology and support services (PTES), as well as key concepts related to tokenized SVFs and token disclosure requirements.

➡️ What does the reform include?

📌 New requirements for the protection of customer funds held by payment service providers (PSPs), particularly in cases where funds could be exposed to operational failures or internal disruptions. These obligations will become part of both the AFS licensing regime and the broader prudential framework.

📌 Amendments to the consumer protection provisions under the Australian Securities and Investments Commission Act (ASIC) of 2001. The changes grant regulators broader supervisory powers and formally extend these protections to the payments sector while maintaining existing financial safeguards.

📌 The introduction of a dedicated mechanism for handling unclaimed funds. If funds stored by electronic wallet providers or SVF operators are not returned to their owners, they may be transferred to ASIC, which will oversee the corresponding procedures.

📌 Expanded authority for the Australian Prudential Regulation Authority (APRA), whose oversight will now also cover major SVF operators and payment service providers (PSPs).

➡️ Regarding licensing and license revocation:

📌 All providers of services related to prepaid cards, debit cards, direct debit, cross-border transfers, stablecoins, payment gateways, and acquiring services will be required to obtain an Australian Financial Services (AFS) license.

📌 Except in cases involving entirely new payment solutions, previous decisions concerning the issuance or revocation of licenses under ASIC regulations will remain valid.

➡️ Phased implementation and transition period

📌 Before the end of 2026, the legislation must receive formal Royal Assent. A one-year preparatory period will then follow to allow the industry to adapt to the new framework.

📌 Once this phase is completed, Australian payment service providers will have:

🔘1 month to submit final authorization applications if they already hold a license;

🔘or up to 6 months if they are not yet licensed.

📌 During the transition period, companies will be permitted to continue operating normally while adapting to the updated regulatory requirements.

➡️ What comes next?

📌 Australian authorities have already indicated that a future reform package, known as “Tranche 2”, is expected to focus on improving and expanding non-bank access to key payment infrastructure and industry standard-setting bodies.

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