Stripe and University of Sydney.
The Australian Securities and Investment Commission (ASIC) reports the total value of all BNPL transactions increased by 79% in the 2018–19 financial year. This continues into 2022 with an annual growth beyond 30% according to the Reserve Bank of Australia (RBA).
PayID and PayPal payments are also claiming their shares in this space.
Are government regulations necessary?
The government’s planned regulation of the system, contained in amendments to the Reforms to the Payment Systems (Regulation) Act 1998, is a big step towards establishing a secure and trustworthy cashless society in Australia.
It will subject BNPL and digital wallet service providers like Apple Pay and Google Pay to the same oversight by the RBA as traditional credit and debit cards.
The regulations will require providers meet clear standards for security measures, data protection and dispute resolution to give Australians confidence their funds and personal information are safeguarded.
With increasing concern over cyber attacks, the regulations will help reduce the risk of fraudulent activities and money laundering and help identify suspicious transactions, maintaining the integrity of the financial system.
Also, regulation will promote fair competition and market stability by levelling the playing field and by preventing monopolies.
While banks support the forthcoming regulation, new market players are less positive. For example, Apple Pay says it is merely providing technical architecture rather than payment services.
The current regulatory debate is not new. When credit cards made their debut in Australia in the early 1970s, there were hardly any safeguards for consumers. This led to card users being hit with high interest rates on money owed, sneaky fees and aggressive marketing tactics.
Consequently, regulations were introduced to hold card providers to a standard of responsible behaviour. Today, they must openly disclose interest rates, fees and charges, and follow stringent guidelines in advertising their products and services.
Regulating digital wallet providers strikes a crucial balance between innovation and accountability, ensuring life-changing technology continues to serve the public interest.
The shift towards a cashless society in Australia isn’t just a possibility, it’s already well underway.
The blend of technological advancements, changing consumer preferences and regulatory adaptations has set the stage for this transformation. The new regulations will help Australians navigate this transition more confidently.