Tech reviews

‘we have work to do’ on big tech payments

The RBA has encouraged Scott Farrell, a partner at King & Wood Mallesons who has completed a review for Treasury on the future regulatory architecture of the payment system, to consider the change. It “would give us more flexibility”, Dr Lowe told the committee. The Farrell report has not been released.

Square’s acquisition of Afterpay, which still requires various approvals and would become Australia’s largest mergers and acquisitions deal, comes as Apple and Google play a more influential role in processing tap and go payments.

CBA chief executive Matt Comyn said last week that Apple should be regulated. “Manufacturers of mobile handsets and associated software set the terms on which third parties can offer these app-based services, particularly with respect to payments for, and via, these services,” he said.

Dr Lowe said on Friday payments policy involves “a lot of complicated issues” and “the payments landscape is changing very, very rapidly”.

“Our regulatory arrangements need to keep pace with that. They need updating in a couple of areas. We have further work to do here.

“Our regulatory arrangements need to keep pace with the fast-moving landscape … [and] I encourage the parliament over time to adjust the regulatory arrangements here.”

Dr Lowe agreed Apple’s closed payments infrastructure, criticised by Mr Comyn, was “an issue” – but not something the RBA had power to change.

“The Parliament could set up a process to do that if it so chose,” Dr Lowe said. “We are going to have a more competitive system if there can be competition among the providers of digital wallets.

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“Ultimately there will be lower fees and better services if we have competition and open access. That is an issue. But it’s not something the Reserve Bank can do anything about. We don’t have the power to do it.”

The parliamentary join committee last week indicated it could call on Treasurer Josh Frydenberg to widen the terms of reference for the ACCC’s digital platform inquiry to include payments.

Australia is not alone in grappling with the growing influence of big tech. The Bank of International Settlements published a paper this week titled Regulating big techs in finance.

It pointed to the ability of big tech firms entering financial services to scale up rapidly with user data from their existing business lines in e-commerce and social media, and by harnessing the inherent network effects in digital services.

The entry of big techs into financial services gives rise to new challenges surrounding the concentration of market power and data governance, BIS said.

It said the current framework for regulating financial services follows an activities-based approach, where providers must hold licences for specific business lines, but there is “scope to address the new policy challenges by developing specific entity-based rules, as proposed in several key jurisdictions”, including the European Union, China and the US.

“Given the potential for rapid change, the absence of currently dominant platforms should not be a source of comfort for central banks,” the BIS said.

“Rather, they should anticipate developments and formulate policy based on possible scenarios where big tech initiatives may already have reshaped the payment system, instead of focusing on the market structure of the payment system as it currently stands.”

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