New RBA powers to regulate Apple, Google payments
Key Points
- Draft legislation to regulate digital wallets will be released on Wednesday.
- Apple and Google say they do not provide payments services in Australia.
- But CBA say new powers are needed to oversee Apple as digital wallets grow.
The Albanese government is moving to regulate Apple Pay, Google Pay and other new digital payment services by expanding the Reserve Bank’s powers, with draft legislation to be released on Wednesday.
The bill will allow the RBA to regulate digital wallet providers in the same way as credit card networks and other types of transactions. The Treasurer will also get a new designation power to order regulatory oversight in the national interest.
The government will release draft legislation on Wednesday to allow the RBA to regulate digital wallets such as Apple Pay. Josh Robenstone
The government said this would address risks posed by new digital payment services – currently unregulated – to “protect consumers, promote competition and spur innovation”.
Former RBA governor Philip Lowe and Commonwealth Bank chief executive Matt Comyn have backed the expanded law, as recommended by lawyer Scott Farrell’s payments system review for Treasury in August 2021. They could allow the RBA to regulate pricing, access rules and request data from the technology companies.
Mr Comyn told a parliamentary hearing in July 2021 that Apple was free-riding on banks’ investments in payments infrastructure and its rules around banks’ access to iPhones to make tap-and-go payments could be anticompetitive.
In June, the CBA boss likened Apple to a “gatekeeper”, similar to Standard Oil early last century and Microsoft in the late 1990s, which were ultimately targeted by antitrust actions. Dr Lowe said last December the new powers might be used to investigate banks’ access to the Apple Pay wallet.
Figures from the Australian Banking Association show nearly two-thirds of people aged between 18 and 29 use mobile payments, with payments using smartphones surging to 35 per cent of total card transactions in the June quarter, up from 10 per cent in early 2020.
Apple and Google have objected to being regulated as payment providers. Both told a parliamentary hearing in June they do not provide payments services, but merely are a new way customers can present bank cards through phones. Apple has described Apple Pay as technical architecture for banks to offer their consumers a safer and more secure way to pay and say the wallet is pro-competitive by allowing various cards to be stored.
Google does not charge banks for using Google Pay on Android phones, but banks do pay fees to Apple – a few cents for every $100 of transactions – which is costing more than $110 million a year.
The new legislation, which will be released for public consultation, will amend the Payment Systems (Regulation) Act 1998 to update the definition of “payment” and “payment systems” to capture the new payment methods. The new ministerial designation power will allow particular payments services or platforms that present risks of national significance to be subject to additional oversight by regulators.
The government announced its plans to expand the RBA’s powers last December after they were earlier considered by the former Morrison government.
Treasurer Jim Chalmers said the government is modernising Australia’s payments system “to ensure it meets the needs of our economy now and into the future”.
“As payments increasingly become digital, our payments system needs to remain fit for purpose so that it delivers for consumers and small businesses,” he 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.”
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