Australia's payments landscape is undergoing its most significant regulatory transformation in over two decades. The government is modernising the way payment service providers (PSPs) are regulated, reflecting the dynamic nature of modern payment products and services and replacing outdated concepts with a technology-neutral, activity-based licensing framework. This means new rules for businesses that help people move money, store value, or use digital wallets.
Where things stand
The reforms are being introduced in stages. On 9 October 2025, the government released Tranche 1a exposure draft legislation, Treasury Laws Amendment Bill 2025: Payments System Modernisation - Amendment of the Corporations Act 2001 (Bill), which establishes the foundations for the new payments licensing framework in the Corporations Act 2001 (Cth) (Corporations Act).
The reform package (Tranche 1 as a whole) proposes to introduce amendments that will:
Bring key payment products and services into the Australian financial services licensing (AFSL) regime.
Empower APRA to set prudential standards for major stored value facility (SVF) providers and certain designated PSPs, with SVF providers becoming APRA-regulated if the total credit across their SVFs exceeds $200 million (group aggregate basis). Major SVF providers must register with APRA and comply with prudential standards but are not treated as ADIs or required to be licensed by APRA.
Introduce a rule-making power for the Minister to make a mandatory ePayments Code to set baseline consumer protections across the ecosystem.
Introduce new requirements to safeguard payment-related money held by AFSL holders based on the client money regime in the Corporations Act, but with adjustments to apply effectively for money that is being held in, or transferred through, SVFs, payment instruments and payment services.
Streamline the management of inactive and dormant money in major SVF accounts, aligning obligations with those for banks regarding unclaimed money.
Key changes under the Bill
The Bill repeals the existing non-cash payment (NCP) facility concept and introduces technology-neutral, function-based definitions that reflect the activities of providers.
The Bill introduces three new financial products and three new categories of financial services provided by PSPs, based on new definitions of "funds", "transfer" and "non-cash funds transfer":
SVFs (for example, prepaid cards and digital wallets that store value);
Tokenised SVFs (for example, stablecoins that reference the value of a single currency – note that a stablecoin is not itself regulated as a financial product as it is connected to the tokenised SVF, which is the financial product)
Payment instruments (for example, debit and credit card facilities (including virtual versions), online account management facilities such as direct debit or PayTo, and BPay facilities).
Payment initiation services (for example, direct debit services; PayTo services).
Payment facilitation services (for example, merchant acquiring services; domestic and cross-border remittance services).
Payment technology and enablement services (for example, Payment gateways; pass-through digital wallets).
The proposed amendments will cause a shift in some activities from being regulated as financial products to being regulated as financial services.
Entities that issue SVFs or payment instruments, or provide payment initiation, facilitation, or technology/enablement services, must hold an AFSL with appropriate authorisations or operate as an authorised representative of another licensee.
The framework only captures entities that are constitutionally-covered corporations: foreign, financial or trading corporations; companies; bodies corporate; and certain unincorporated bodies. In practical terms, this means the framework primarily applies to companies incorporated in Australia, foreign companies operating in Australia, and trading or financial corporations.
The reforms apply the AFS licensing framework to the provision of payment services and financial services relating to SVFs and payment instruments with appropriate adjustments to reflect the nature of these types of services.
Adjustments to retail and wholesale client definitions:
Payment services above a value threshold (to be set in regulations) are considered to be provided to wholesale clients, including services to licensed PSPs, via the "professional investor" limb. This distinction matters because wholesale services attract fewer consumer protection requirements, recognising that professional and institutional clients can negotiate terms and protect their own interests.
Importantly, the "sophisticated investor" exemption does not apply to SVFs, payment instruments, or payment services. PSPs must have appropriate dispute resolution systems in place even for services provided to persons who could otherwise be considered sophisticated investors.
New obligations for intermediary PSPs: PSPs that operate as intermediaries must take reasonable steps to cooperate with AFCA regarding complaints under the AFCA scheme and cooperate with other licensees. Civil penalties apply for non-compliance.
Tokenised SVF providers face enhanced transparency requirements.
Ongoing disclosure obligations: Providers must publish on the internet a notice of any material change or significant event that may reasonably affect either their ability to meet redemption obligations or the value of reserve assets held to meet those obligations.
Monthly disclosure: Within the first seven days of each calendar month, providers must publish on the internet information relating to reserve assets and outstanding liabilities, as may be required by regulations.
ASIC powers: ASIC's existing information gathering powers are extended to allow ASIC to request information from persons it reasonably suspects of providing payment services or financial services relating to SVFs or payment instruments without the relevant authorisation. This extension allows ASIC to properly investigate potential unlicensed conduct.
Interaction with other reforms
On 30 July 2025, the government introduced the Treasury Laws Amendment (Payments System Modernisation) Bill 2025 to the House of Representatives. The Bill was passed by both Houses of Parliament and received Royal Assent on 19 September 2025. Read our insight on the payment system modernisation reforms here.
On 25 September 2025, the Australian Government released exposure draft legislation aimed at regulating operators of platforms that hold digital assets on behalf of customers. This draft bill similarly introduces new categories of financial products and includes definitions of key concepts, such as "digital token", which is directly relevant to the proposed new financial products under the PSP reforms (particularly tokenised SVFs). Read our insight on digital assets licensing here.
What’s next
Tranche 1a exposure draft legislation consultation period closes on 6 November 2025.
Tranche 1b exposure draft legislation consultation is expected in early 2026, covering additional licensing obligations, APRA powers, unclaimed monies, the ePayments Code rule-making power, and transitional arrangements.
The government aims to introduce a single Tranche 1 package in 2026, followed by consultation on subordinate legislation and further Tranche 2 considerations (including access and industry standards).