December 10, 2018

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Australian Council of Financial Regulators Consults on Changes to Stored-Value Facilities Regulation

The Australian Council of Financial Regulators (CFR) today published an Issues Paper reviewing the regulatory regime of stored-value facilities including purchased payment facilities (PPFs).  The CFR comprises regulators such as APRA, ASIC and the RBA.

PPFs enable funds to be stored for the purpose of making future payments and include mobile wallet services and prepaid cards.  PPF providers must be licensed and supervised by APRA or otherwise rely on an exemption from complying with the legislative requirements.  The RBA has declared several class exemptions for PPFs, including the “limited-value facilities” exemption for PPFs with payment obligations of $10 million or under.

To date, PayPal is the only entity licensed and supervised by APRA as a PPF provider and only one entity has obtained individual exemption from the RBA.  These results support arguments that the current framework is too complicated, deters potential new entrants and imposes significant compliance costs.

Citing both technological developments since the introduction of the regulatory regime in the late 1990s and regulatory developments in overseas jurisdictions, the CFR is seeking views from stakeholders on a number of questions including in relation to:

  • the outlook for stored value facilities in Australia;
  • the definition and scope of stored-value regulation; and
  • appropriate regulatory approach to emerging products and services.

The CFR has also suggested that “medium sized” PPFs with stored value between $10 million and $50 million could be regulated by ASIC under the AFS licensing regime.  This would enable the RBA to focus on regulating payment systems on a system-wide basis rather than on the regulation of individual PPFs.

We welcome the consultation from the CFR.  Our Fintech clients have experienced difficulty in navigating this area due to the ambiguous wording of the legislation.  We think that reform is necessary to enhance competition in the payments space and to further open up the Australian market to innovative offshore providers.

Stakeholders are invited to provide written submissions to the CFR by 19 October 2018 at svfsubmissions@rba.gov.au.

Copyright 2018 K & L Gates

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
Felix Charlesworth, KLGates, Financial attorney
Attorney

Mr. Charlesworth is a commercial and regulatory lawyer with a focus on the financial services industry.

 Mr. Charlesworth advises on a range of regulatory and compliance issues relevant to wholesale and retail fund managers, financial advisers, superannuation fund trustees and other financial services entities. He also has experience in advising multinational corporations about compliance measures targeted at the prevention of bribery and corruption. 

61.3.9205.2128
Edwin Tan, KL Gates, investment fund attorney
Lawyer

Mr. Tan is a commercial and regulatory lawyer with a focus on the financial services industry. He advises on a range of Australian regulatory and compliance issues relevant to FinTechs, fund managers, financial advisers and other financial services entities.

Mr. Tan also provides advice on governance and compliance measures targeted at the prevention of bribery, corruption and anti-money laundering.

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