Late last week, the federal government released the report of the Council of Financial Regulators’ (CFR) review of the regulation of stored‑value facilities (SVFs) in Australia. The review follows the government’s promise to introduce a new regulatory framework for SVFs, outlined in the 2020–21 budget.
The CFR’s 11 recommendations seek to “prioritise innovation, competition and robust protections for consumers”.
Among the recommendations outlined is that “regulation of SVFs and other payments products should be graduated and commensurate with risks to consumers” and that the Reserve Bank of Australia should no longer be involved in regulating individual providers of SVFs, in order to allow for greater streamlining.
“APRA should be responsible for prudential supervision of providers of large SVFs that offer similar functionality to bank deposits, with the existing prudential framework reformed to make it simpler, more targeted to risks and better aligned with international approaches,” another recommendation of the review highlighted.
Further, the review said ASIC should be responsible for regulating providers of SVFs (and other payments products) that do not meet the criteria for APRA supervision, and these SVF providers should be subject to additional requirements to ensure the safety of customers’ funds.
“Compliance with the ePayments code should be mandatory for payments product providers,” it added.
Commenting on the recommendations, Senator Hume said the review “addresses a regulatory framework that had remained static for decades, and will open up new opportunities for Australian businesses and consumers”.
“[They will] reduce red tape, uncertainty and complexity and will bring Australia in line with our key global financial partners,” she said.
“SVFs are payment services that enable customers to store funds in a facility for the purpose of making future payments. They encompass services including international money transfers, gift cards, prepaid cards and digital wallets.
“There is potential for SVFs to become a more prominent part of the payments system, as part of a rapidly changing global market that encourages innovation and consumer choice.”
In conclusion, Senator Hume flagged that changes to legislation and prudential standards are needed to give effect to the reforms.
“I have asked Treasury to work with APRA and ASIC to develop the reform package, and to do so in close consultation with a wide range of industry and consumer stakeholders,” she said.