Government releases draft legislation for Apple and Google Pay regulation

On Wednesday the federal government handed down draft legislation that would allow the Reserve Bank of Australia (RBA) to regulate digital payment services such as Apple Pay and Google Pay.

If passed this will see an update to the Payment Systems (Regulation) Act 1998 to allow the RBA to treat these services, as well as buy now pay later (BNPL) platforms in a similar fashion to traditional transaction types, such as credit cards.

“Introducing a new ministerial designation power that will allow particular payment services or platforms that present risks of national significance to be subject to additional oversight by appropriate regulators,” the update reads.

Back in May CBA called for regulation of these services, particularly regarding restrictions for “tap and go payments that occur through NFC chips on iPhones, which sends the payments through the Apple Wallet, rather than a bank’s app.

CBA said that third-party financial institutions should have “reasonable and equivalent” access to the NFC chips to allow for direct payment from their own apps. This recommendation was also made by the ACCC in its Digital Platforms Service Inquiry.

Apple has responded to this previously saying that it “does not provide uncontrolled access by third parties to the NFC antenna, as this would undermine the seamless customer experience for switching cards and create avenues for third parties to hack into iPhone and Apple Watch, to access the sensitive data stored within these devices”.

CBA has been lobbying for regulations for the past two years, saying that the lack of regulation could allow international big tech companies to engage in “anticompetitive self-preferencing, anticompetitive tying, and unreasonably preventing consumer switching” behaviour in the Australian payments space.

Both Apple and Google spoke out against being regulated similarly to traditional payment providers during a parliamentary hearing back in June. According to the companies, they are not payment service providers. Instead, they offer an alternative means for a consumer to utilise bank cards through their devices.

“Any assessment of Apple Pay’s role in payments needs to be grounded in fact. Apple does not itself provide financial or payment services in Australia. Apple does not issue debit, credit or prepaid cards in Australia, nor does Apple acquire, process, authorise or execute transactions,” Apple said in its submission.

“Apple Pay is ultimately a payment presentment method through which consumers can make payments from Apple devices with their existing debit, credit or prepaid cards issued by banks in an easy, secure and private way. Apple has invested significant resources to develop the technical architecture that can be used by banks to offer their customers a safer and more secure way to pay with their cards.”

Potential stakeholders are able to submit responses to the draft legislation until November 1.