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A new licensing and compliance regime aims to modernise Australia’s payment system regulation, responding to the rapid evolution of payment technologies and the increasing complexity of the financial services landscape. The reality is that with the rise of digital wallets, payment stablecoins, and cross-border financial technologies, it has become essential to update regulations not originally designed for simpler times.
The smartphone revolutionised how we communicate, and Australia’s new payment licensing regime aims to revolutionise how payments are regulated—creating a safer, innovative environment for consumers and providers alike.
The regime specifically targets payment service providers (PSPs) to ensure they operate under a robust regulatory framework that can adapt to technological advancements and evolving consumer expectations. This initiative involves updating the Payments Systems (Regulation) Act 1998 and introducing a comprehensive licensing framework. The aim is to provide consistent, risk-based oversight that balances customer protection, innovation, and operational efficiency while ensuring Australia remains competitive in the global payments ecosystem.
From 10 June 2025, BNPL providers must hold a credit licence under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024. ASIC has alerted providers to apply for or vary their credit licence by 11 May 2025 to ensure compliance with the new credit licensing requirements. This includes becoming an Australian Financial Complaints Authority (AFCA) member. Providers who fail to comply may be engaging in unlicensed conduct.
BNPL providers must apply for a credit licence with ASIC, ensuring the application includes necessary documents such as criminal history checks and bankruptcy checks. These steps are required for the licence application to be accepted. Providers must act early to avoid delays, as it may take time to gather the necessary information.
“BNPL Providers who fail to submit a complete application by 10 June 2025 will risk operating without a licence and may face regulatory penalties.”
Objectives of the Proposed Licensing and Compliance Regime
“As set out in the Strategic Plan for Australia’s Payment System, the Government is updating the payments regulatory framework to ensure it is fit for purpose for the modern economy.”
– Consultation Paper, Treasury, June 2023
The updated regulatory framework has several key goals:
1. Standardising Regulation: Establishing consistent regulation for PSPs to provide consumer protection while promoting innovation and operational efficiency. This includes bringing various payment functions under a unified licensing approach to ensure consistent oversight and accountability.
2. Simplifying Processes: Streamlining licensing processes, particularly for entities needing multiple authorisations, making it easier for businesses to operate. Introducing a single licensing system through the Australian Financial Services (AFS) licensing framework reduces administrative burden and clarifies compliance obligations for providers.
3. International Alignment: Aligning Australia’s payments regulatory framework with global standards to help local providers compete in international markets. This also includes ensuring Australian businesses comply with international financial regulations, fostering trust and enabling cross-border partnerships.
Roles of Regulatory Authorities in the Proposed Regime
“The Government is addressing policy issues posed by new payments technologies by updating the Payments Systems (Regulation) Act 1998 (Cth) (PSRA) and introducing a licensing framework for payment service providers (PSPs).” – Consultation Paper, Treasury, June 2023
1. Australian Securities and Investments Commission (ASIC): ASIC will serve as the primary regulator for licensing and compliance, ensuring that PSPs meet the conditions required for Australian Financial Services (AFS) licensing. ASIC will also focus on conduct regulation and consumer protection, overseeing the fair treatment of customers by payment service providers. ASIC’s will regulate BNPL providers under the Australian Financial Services (AFS) licensing framework. Given the growing prominence of BNPL in consumer transactions, ASIC will oversee the licensing process, ensuring that BNPL providers meet conduct regulations, including responsible lending and consumer protection practices. Providers must submit their applications for a credit licence by 11 May 2025 to maintain the benefit of transitional arrangements, allowing them to continue operations until their licence applications are assessed.
2. Australian Prudential Regulation Authority (APRA): APRA will oversee the prudential regulation of major PSPs, especially those managing significant customer funds such as major stored-value facilities (SVFs). APRA’s will ensure these entities meet strict financial stability and liquidity requirements to protect consumers and reduce systemic risks.
3. The Reserve Bank of Australia (RBA): The RBA will play a key role in setting and enforcing technical standards for payment systems, ensuring that systemic stability and efficiency are maintained across the broader payment network.
4. The Treasury: The Treasury will provide policy direction and work on legislative updates to ensure the payments system remains aligned with international best practices and evolving technological landscapes.
Key Components of the Proposed Regime
“The payments licensing framework seeks to set regulatory obligations that allow for sufficient flexibility, is ‘future-proofed’ for future developments, and adequately balances the objectives of the reforms.” – Consultation Paper, Treasury, June 2023
The framework defines several distinct payment functions, each with specific compliance obligations. The key categories include:
1. Stored-Value Facilities (SVFs)
Stored-value facilities refer to accounts or devices where customers load funds that can then be used for various transactions, including payments, transfers, or withdrawals. These facilities provide a bridge between a customer’s funds and the transactions they want to make.
Examples:
- Digital Wallets: Services like Apple Pay, Google Pay, and Samsung Pay allow customers to store card information and make payments electronically, both in-store and online.
- Prepaid Cards: Examples include gift cards, travel cards, or prepaid Visa/Mastercard that can be used until the balance is exhausted.
- Stored-Value Accounts: Platforms like PayPal allow users to maintain balances, which can be used for payments or transfers.
- Buy Now, Pay Later (BNPL) Cards: These cards, issued by providers like Afterpay and Zip Pay, allow consumers to make purchases and pay later. BNPL products have been rapidly evolving in the Australian market, necessitating their integration into the licensing framework to ensure consumer protection standards are met.
2. Payment Stablecoins (PSCs)
Payment Stablecoins are digital assets specifically backed by fiat currency. They are intended to maintain a stable value, making them suitable for everyday payments. Unlike other cryptocurrencies, stablecoins are designed to avoid volatility.
Examples:
- Tether (USDT) and USD Coin (USDC): These stablecoins are backed by reserves of traditional currencies, providing stability.
- AUD Stablecoins: Some Australian banks, such as NAB or ANZ, are exploring stablecoins backed by the Australian dollar to facilitate domestic and international transactions.
Payment stablecoins are regulated under the SVF framework as they share similar characteristics to other stored-value products—the stored value can be used for payments or held as an asset.
3. Payment Instruments
Payment Instruments are personalised tools that allow individuals to initiate payments. This category includes physical tools, like cards, and digital means, such as linked apps or services.
Examples:
- Credit and Debit Cards: Issued by institutions like Commonwealth Bank, ANZ, or Westpac, allowing customers to pay using linked funds or credit lines.
- Buy Now, Pay Later (BNPL) Cards: These cards are issued by providers like Afterpay or Zip Pay, allowing consumers to make purchases and pay off their balance later.
- Cheques: Though less common today, cheques are still considered a payment instrument under the regime.
The regulatory regime ensures that providers offering these instruments are licensed and compliant, focusing on reducing risks associated with fraud or misuse.
4. Payment Facilitation Services
Payment Facilitation Services involve entities that handle the possession of funds to facilitate payments. They act as intermediaries, allowing seamless transactions between payers and payees.
Examples:
- Merchant Acquirers: Companies like Square and Stripe process payments on behalf of merchants, transferring money from customers to merchants.
- Payment Aggregators: Platforms like PayPal and Adyen aggregate customer payments and disburse them to sellers.
- Marketplaces and Platforms: Sites like eBay and Etsy hold funds as part of their transaction process, releasing the money to sellers after the transaction is confirmed.
Payment facilitators are crucial for e-commerce, simplifying the payment process for merchants and small sellers.
5. Payment Technology and Enablement Services
These services are third-party tools that facilitate payments without controlling or possessing funds. They ensure the infrastructure needed for payments to be processed effectively.
Examples:
- Payment Gateways: Services like Braintree or Authorize.Net provide the technical infrastructure that connects online merchants to payment networks.
- Authentication Services: Platforms like Auth0 or Okta offer identity verification to ensure the security of payment transactions.
- Pass-Through Digital Wallets: Apple Pay, which manages payment instruments without storing the actual funds, is a key example.
Enablement services are vital to smooth, secure payment processes, providing essential transaction infrastructure.
6. Cross-Border Transfer Services
Cross-Border Transfer Services refer to PSPs that help customers send or receive money internationally. This function is key for individual remittances as well as international business transactions.
Examples:
- Money Transfer Operators: Companies like Western Union and MoneyGram offer services for sending money across borders, often using cash-to-cash services.
- Online Cross-Border Services: Platforms like Wise (formerly TransferWise) and Revolut provide cost-effective ways to transfer funds internationally with lower fees than traditional banking options.
- Crypto-Based Transfers: Some services use cryptocurrencies (e.g., Bitcoin or stablecoins) to facilitate transfers, reducing dependence on traditional banking systems.
These services address the needs of diverse user groups, from individuals sending remittances to companies handling international transactions. Under the proposed regulatory framework, they are managed separately from domestic transfers, reflecting the additional risks and complexities they involve.
7. Low Cost Credit Contracts
Some BNPL contracts will qualify as low-cost credit contracts under the new regime. These contracts will be subject to modified responsible lending obligations, detailed in ASIC’s forthcoming regulatory guidance. Providers must ensure they understand these obligations and are prepared to comply by 10 June 2025.
Three Key Regulatory Layers in the Proposed Framework
“Financial services regulation will apply to the proposed payment functions. In addition, prudential regulation by the Australian Prudential Regulation Authority (APRA) will apply to Major Stored-value Facilities (SVFs), and technical industry standards will apply to a broad range of participants and operators of payment systems.” – Consultation Paper, Treasury, June 2023
The framework proposes three key regulatory layers to comprehensively cover the range of services provided by Payment Service Providers (PSPs):
1. Financial Services Regulation (ASIC Oversight): Financial services regulation will apply to the proposed payment functions under the Australian Securities and Investments Commission (ASIC) oversight. ASIC is responsible for licensing and ensuring PSPs comply with conduct and disclosure obligations under the Australian Financial Services (AFS) licensing framework. The licensing will be structured based on each PSP’s specific activities, categorised into distinct payment functions such as Stored-Value Facilities (SVFs), Payment Facilitation, and Cross-Border Transfers. Activities will be designated based on risk and service type, and regulated parties will assume obligations similar to those under s912A of the Corporations Act 2001. These obligations include ensuring compliance with financial services laws, maintaining competence, managing conflicts of interest, and providing efficient, honest, and fair services. This layer ensures customer protection, transparency, and ethical conduct within the payment industry.
2. Prudential Regulation (APRA Oversight) for Major SVFs: In addition to ASIC’s financial services oversight, the Australian Prudential Regulation Authority (APRA) will apply prudential regulation to Major Stored-Value Facilities (SVFs). APRA oversees the financial health, stability, and liquidity of PSPs that manage significant consumer funds. This prudential oversight helps mitigate systemic risks and protect the interests of consumers.
3. Technical Industry Standards for System Participants: The Reserve Bank of Australia (RBA) will be responsible for setting and enforcing technical standards for payment system participants. These industry standards ensure that all technical operations are consistent, secure, and aligned with national infrastructure requirements, contributing to the stability and efficiency of Australia’s payment systems.
Compliance Obligations Under the Proposed Regime
The new licensing framework also includes several compliance obligations to manage financial, operational, and misconduct risks. These obligations are tailored according to the nature of the payment function:
- Design and Distribution: Ensuring that payment products meet customer needs and are distributed responsibly.
- Client Money Rules: Rules around the safekeeping of customer funds, ensuring funds are segregated and protected against misappropriation.
- Compensation and Disclosure: Ensuring customers are informed and protected against loss due to malfeasance or operational failures.
- Compliance Obligations for BNPL Providers: As part of the licensing framework, BNPL providers will be subject to specific compliance obligations, including transparency in advertising, responsible lending practices, and providing clear terms for customers. These obligations are critical for protecting consumers from over-indebtedness and ensuring providers meet their regulatory responsibilities.
The Australian Prudential Regulation Authority (APRA) will oversee prudential standards for major PSPs, particularly those involving significant customer funds (e.g., large stored-value providers). Industry standards on data security, operational resilience, and an updated ePayments Code are also being developed to ensure consistent, industry-wide standards.
Implementation and Feedback
“The principles outlined in this paper have not received Government approval and are not yet law. As a consequence, this paper is merely a guide as to how the principles might operate and are subject to legislative design and advice.” – Consultation Paper, Treasury, June 2023.
As of 10 June 2025, BNPL providers must hold a credit licence under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024. ASIC has alerted providers to apply for or vary their credit licence by 11 May 2025 to ensure compliance with the new credit licensing requirements. This includes becoming a Australian Financial Complaints Authority (AFCA) member. Providers who fail to comply may be engaging in unlicensed conduct. There will be further consultation to finalise technical standards and supporting regulations, but the obligations for Payment Service Providers (PSPs) under the proposed licensing framework are already open for consultation. The Australian Treasury’s consultation paper outlines the intention to apply financial services regulation to the proposed payment functions, with oversight by the Australian Securities and Investments Commission (ASIC). This suggests that PSPs may be required to hold an Australian Financial Services Licence (AFSL) and comply with obligations similar to those under section 912A of the Corporations Act 2001, which include:
- Ensuring compliance with financial services laws
- Maintaining competence
- Managing conflicts of interest
- Providing efficient, honest, and fair services
ASIC and Treasury concluded their consultation on the regulatory obligations under the new licensing framework on 7 March 2025. Following the Royal Assent of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 on 10 December 2024, new credit licensing requirements for BNPL providers will commence from 10 June 2025. Providers must submit complete licence applications to ASIC by 11 May 2025 to maintain eligibility for transitional arrangements. This approach aims to balance innovation with enhanced consumer protection and ensures industry participants, including PSPs, banks, and consumers, had ample opportunity to shape detailed requirements through the consultation process.
ASIC has however invited industry feedback on its draft regulatory guidance, including Regulatory Guide 000 and Consultation Paper 382 on low-cost credit contracts.
Providers must review this guidance as part of their preparation for the 10 June 2025 deadline to ensure compliance with the modified responsible lending obligations
Industry Feedback on BNPL Regulation
During the consultation process, significant feedback was received from the BNPL sector. Providers expressed concerns about the practical implications of licensing requirements, especially regarding the affordability checks and transparency measures that will be enforced under the new regime. There was notable pushback from BNPL providers about the government’s decision to implement stricter regulations under Option 2 of the Treasury’s consultation paper. In summary, the Industry’s key points were:
Preference for Less Prescriptive Regulation:
Many BNPL providers advocated for Option 1, which proposed expanding the existing BNPL Industry Code with lighter regulatory requirements. They argued that their technology-driven processes for assessing credit risk were already tailored to their product profiles and did not require full alignment with responsible lending obligations under the Credit Act.
Concerns About Increased Compliance Costs:
The requirement to obtain an Australian Credit Licence (ACL) and comply with modified responsible lending obligations under Option 2 is seen as a significant administrative and financial burden. Providers expressed concerns about absorbing these costs without impacting profitability in an increasingly competitive market.
Disagreement with Regulatory Parity:
Some providers opposed treating BNPL products similarly to traditional credit products, arguing that BNPL-specific regulations would better reflect how consumers use these services. For example, Affirm stated that lumping BNPL providers with credit card companies could confuse customers and harm the industry.
Operational Challenges:
Providers highlighted challenges in adapting their systems to meet new requirements, such as affordability checks, fee caps, and mandatory disclosures. The inclusion of anti-avoidance provisions further limits flexibility in compliance strategies.
Regulator and Consumer Advocate Perspectives:
However, ASIC supported Option 3, which proposed the most stringent regulations, emphasising that BNPL products should have consumer protections comparable to other credit products due to similar risks. Similarly, Consumer advocates welcomed measures like affordability checks, fee caps, and mechanisms to identify vulnerable consumers, viewing them as necessary safeguards against financial harm.
Unsurprisingly, while regulators and consumer groups largely support stricter measures for consumer protection, BNPL providers have expressed concerns about increased regulatory burdens, operational costs, and the potential impact on innovation and profitability. There was little ground given in response to Industry’s concerns but the Treasury and ASIC confirmed that they would consider this feedback as they finalised the licensing framework.
Here are ASIC’s updated resources and guidance on BNPL licensing and obligations:
- ASIC Alert to BNPL Providers: ASIC Alert
- ASIC’s Feedback on BNPL Regulatory Guidance: ASIC Feedback Invitation
- ASIC’s Information Sheet on BNPL Credit Licensing: ASIC Information Sheet 285
Possible Implications of the New Licensing Framework
As the new licensing and compliance regime for payments and BNPL approaches, our experience suggests that we need to consider the likely outcomes, potential challenges, and opportunities for industry players. Whether you see this as the right time to “sharpen the saw” or simply recognise the need for “more speed, less haste”, it’s important to look beyond the initial obligations and inconveniences. In our view, these include:
1. Market Consolidation and Competitiveness
Stricter regulations, including mandatory licensing and affordability checks, are likely to prompt consolidation within the BNPL industry. Smaller providers may exit the market or merge with larger entities due to increased compliance costs. This could lead to:
- Reduced competition, potentially limiting consumer choice.
- Enhanced market stability, with fewer but stronger players capable of meeting regulatory obligations.
2. Impact on Innovation
While regulatory frameworks aim to protect consumers, overly prescriptive regulations may inadvertently stifle innovation. Based on similar changes, we’d anticipate:
- Initial slowdown in product innovation as providers adapt to new regulatory requirements.
- Subsequent increase in innovative compliance technologies (RegTech), as firms seek cost-effective methods to meet obligations efficiently.
3. Consumer Behaviour Shifts
The inclusion of mandatory affordability checks and clearer disclosures might significantly influence consumer behaviour:
- Consumers may shift towards providers offering clearer, simpler compliance processes, enhancing transparency. Although, we’d draw your attention to ASIC’s REP632 on consumer behaviour and to our previous articles about the limitations of disclosure.
- Providers could experience an initial decline in consumer usage, followed by gradual recovery as consumer confidence in regulated BNPL products grows.
4. Regulatory Enforcement Trends
Given the stringent compliance expectations, we anticipate:
- An initial period of increased enforcement activity by ASIC, particularly targeting compliance with responsible lending and transparency obligations.
- Increased reliance on regulatory technology to preemptively identify and manage compliance risks, reducing regulatory scrutiny.
5. Strategic Opportunities for Providers
Providers who proactively adapt to regulatory changes stand to gain significant competitive advantages which, in our view, represents opportunities such as:
- Leveraging compliance as a differentiating factor to attract safety-conscious consumers.
- Investing in compliance technology early to achieve long-term cost savings and operational efficiencies.
- Exploring strategic partnerships or collaborations to mitigate compliance costs and share technological advancements.
Oh Brave New Payments World
The proposed licensing and compliance regime is set to transform Australia’s payments landscape by categorising payment services into clearly defined functions, each tailored to address specific financial, operational, and technological risks. Imagine a payments ecosystem that anticipates innovation, safeguards consumer interests, and enhances market confidence. From Stored-Value Facilities that simplify daily transactions to sophisticated Cross-Border Transfer Services connecting Australian businesses globally, this new regime will offer targeted oversight ensuring both consumer protection and operational excellence. Ultimately, the Government’s vision is to establish a dynamic, resilient, and future-ready framework that supports technological advancement while aligning with best practices from around the world. Unfortunately, as successive programs of financial advice reforms demonstrate, legislative intent does not always deliver clear and effective regulation. Perhaps BNPL regulation will be “the exception that proves the rule” (but we suspect lawyers are betting otherwise).
The countdown to compliance has started—ensure your business is ready ahead of the 10 June 2025 deadline. Partner with Assured Support to confidently thrive in the new compliance world.
Further reading
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Frequently Asked Questions
Australia’s new payments licensing and compliance framework is a regulatory overhaul designed to modernise the Payments Systems (Regulation) Act 1998. It introduces a structured licensing regime for Payment Service Providers (PSPs) and Buy Now, Pay Later (BNPL) providers to enhance consumer protection, ensure regulatory consistency, and align with global payment standards. The framework, effective from June 10, 2025, requires PSPs to comply with stricter financial, operational, and risk management obligations.
BNPL providers must secure an Australian Credit License (ACL) by June 10, 2025, under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024. ASIC has mandated that applications be submitted by May 11, 2025, to ensure compliance with the new requirements and avoid regulatory penalties. This includes meeting responsible lending obligations and becoming a member of the Australian Financial Complaints Authority (AFCA).
Payment stablecoins and digital wallets will now be regulated under the Stored-Value Facilities (SVFs) category. This means entities like Apple Pay, PayPal, and AUD-backed stablecoins must comply with financial services licensing and prudential regulation to ensure customer fund security. The Australian Prudential Regulation Authority (APRA) will oversee major SVFs, ensuring they meet liquidity and capital adequacy requirements to protect consumer funds.
The new licensing framework imposes several compliance obligations, including:
– Financial Services Regulation (ASIC Oversight) – Licensing and conduct obligations under the Australian Financial Services (AFS) framework.
– Prudential Regulation (APRA Oversight) – Stability and liquidity requirements for major stored-value providers.
– Technical Industry Standards (RBA Oversight) – Systemic risk management and technical compliance requirements.
PSPs must also adhere to client money rules, responsible lending practices, and enhanced transparency measures.
BNPL providers face increased compliance costs, licensing requirements, and responsible lending obligations, which could lead to industry consolidation. While the new regulations aim to enhance consumer protection, providers must navigate stricter affordability checks and disclosure rules. However, businesses that adapt early can leverage compliance as a competitive advantage, improving consumer trust and long-term sustainability in the regulated market.
