While banks are subject to a host of prudential and consumer regulations, many new entrants to the payments landscape – including buy now, pay later (BNPL) players like Afterpay – are not. The ABA believes that could endanger the whole system.
“The gaps have the potential to introduce new risk into the payments system or undermine the effectiveness of existing regulation, including consumer protection, and the detection and prevention of money laundering and financial crime,” the ABA said in a submission to Treasury on the matter.
“For example, the detection and prevention of financial crime can become more difficult to achieve where a single entity does not have visibility of the entire transaction path. Some risks and harm may not become visible for some time, liability may not be clear or may fall disproportionately on traditional participants.”
The entry of big tech and fintech players into the Australian marketplace has also highlighted the limits of entity-based regulation and the RBA’s regulatory remit, with the payments system facing “new horizons of open data” and cyber-security risks that were not previously anticipated.
“The next few years may see new types of opportunities and risks introduced into the payments system. This is a time to take stock and ensure payments regulation will be fit for purpose in the future…Regulators need to understand how payments are changing and be able to adapt,” the ABA said.
