Australia’s Federal Treasurer – Josh Frydenberg, mentioned that alongside other recommendations received from a government-commissioned report, he would carefully look into whether the payments system had kept pace with advances in technology and changes in consumer demand or not.
Payments services being provided by tech giants such as Apple, Google and WeChat are not being regulated as they are not designated as payments systems. The Australian authorities, however, want to change this by bringing the payment services of these major companies inside the regulatory system. “Ultimately, if we do nothing to reform the current framework, it will be Silicon Valley alone that determines the future of our payments system, a critical piece of our economic infrastructure,” Frydenberg said in an opinion piece published in the Australian Financial Review newspaper.
Australia’s move aims to gain control over the digital services being provided by major tech companies, as world financial watchdogs have become increasingly afraid that the huge amounts of data controlled by companies such as Facebook, Google, Amazon, and Alibaba could allow them to reshape finance, and destabilize the entire banking system. The Bank for International Settlements (BIS), earlier this month, called for world financial regulators to urgently deal with the growing influence of major tech companies, saying that doing so will help the regulators to be prepared and to act quickly when needed.
To clarify the regulatory status of digital wallets, an Australian report suggested that the Australian government be given the power to designate tech companies as payment providers, clarifying the regulatory status of digital wallets. It was also recommended by the report that the government together with the industry establish a strategic plan for the wider payments ecosystem and that a single, integrated licensing framework for payment systems be developed.
According to the Reserve Bank of Australia- the institution currently in charge of designating or deciding who or what a payment service provider is, payments made through digital wallets had grown to 8 percent of in-person card transactions in 2019, up from 2 percent in 2016.
The digital payments industry continues to boom and many tech companies have tapped into the sector. The Commonwealth Bank of Australia urged regulators to address “competition issues” and take into consideration the safety implications of their use.