Regulation of Payment Service Providers –Tranche 1 Draft Legislation

Why It Matters

The reforms tighten consumer protection and financial‑stability oversight, reshaping how PSPs operate in Australia’s fast‑evolving payments market.

Key Takeaways

• PPF regime replaced by AFS licensing for SVF providers
• APRA gains prudential oversight of major stored‑value services
• Minister can impose mandatory ePayments Code for consumer protection
• New safeguards protect payment‑related and dormant funds
• Tokenised SVF providers face ongoing disclosure obligations

Pulse Analysis

Australia’s payments ecosystem has long been flagged as lagging behind global best practices. The 2021 Review of the Australian Payments System highlighted fragmented oversight and outdated licensing rules that no longer reflect digital wallets, tokenised assets, or large‑scale stored‑value platforms. By issuing a comprehensive tranche 1 draft, Treasury aims to align the regulatory perimeter with contemporary payment innovations, ensuring that licensing, prudential supervision, and consumer safeguards keep pace with market realities.

The core of the reform is the substitution of the purchased payment facility regime with an Australian Financial Services licensing model for stored‑value facility providers. This shift subjects major SVF operators, including tokenised service providers, to APRA’s prudential regime, granting the regulator new monitoring tools to mitigate systemic risk. Concurrently, the Minister gains authority to enact a mandatory ePayments Code, establishing baseline consumer‑protection standards across PSPs, ADIs, and payment participants. Additional provisions lock in safeguards for payment‑related money and introduce a clear process for handling dormant or unclaimed funds, reducing the risk of consumer loss.

For the industry, the drafts signal a move toward greater compliance complexity but also clearer rules of engagement. PSPs will need to adjust licensing structures, upgrade reporting systems, and prepare for APRA’s supervisory expectations, all while meeting the ePayments Code’s consumer‑centric obligations. The 9 April comment deadline offers a narrow window for stakeholders to influence final wording, after which implementation timelines will likely align with the broader Payments System Modernisation agenda. By tightening oversight, Australia positions its payments market to compete internationally while bolstering financial stability.