Modernising Payments: What the 2025 Treasury Amendment Means for the Payments Industry
Market Insights
Snapshot
On 30 July 2025, the Treasury Laws Amendment (Payments System Modernisation) Bill 2025 was introduced to the Commonwealth Parliament. The Bill was passed on 4 September 2025 and, on 9 September, awaits Royal assent. The Explanatory Memorandum states that the Bill is directed at modernising the regulatory payments framework, will ensure that legislation keeps up with the evolving funds transfer landscape, and will address the emerging risks related to payments.
In particular, the Bill will vary substantially expand the regulatory coverage of the Payment Systems (Regulation) Act 1998 (PSRA), by amending key definitions to provide that nascent payment systems and new participants in the payment system, can be appropriately regulated at the outset, without the need for judicial interpretation or further legislative amendment. The amended definitions increase the span and scope of entities or activities that the PSRA captures, by including digitised payment methods that are increasingly being used by consumers. While these new payment methods are likely to be captured by the amended definitions, a very great number of services and functions that would not usually be regarded as payment systems could also fall within the expanded definition. This is exacerbated by a broad and imprecise definition of ‘participants’. It will always be challenging where government’s focus is to ensure that the PSRA adequately covers the payment systems of today but also has the flexibility to cover payments systems of the future. However, there are benefits in having laws that are specific to particular risks that the payment systems raise or are specific to specific payment technologies (eg digital wallets and blockchains).
Under the Bill as currently drafted, there would not be significant consequences or additional risks for a ‘payment system’ or a ‘participant’, until a designation of the payment system, which may be made in the national interest. Nevertheless, an overly broad definition may have unintended consequences, including when future reforms are proposed.
The Minister for Financial Services will be afforded powers to designate payment systems and to respond to broader payments issues, where it is deemed in the national interest to do so, and which go beyond the existing remit of the Reserve Bank. To this end, the Minister may also nominate a special regulator, to be granted certain regulatory powers and functions.
Finally, the Bill increases the maximum penalties for contraventions of both criminal and civil penalty provisions, to reflect the severity of the offences and to deter non-compliant behaviour. This is an important change in the financial regulatory landscape and highlights the government and regulators’ recent focus on enhancing compliance and increasing enforcement in the payments space.
Key changes
| Proposed | Current |
|---|---|
| The definition of payment system will be expanded to cover a much broader range of arrangements, including those that may not action a payment themselves, but facilitate a payment being made. The definition captures the transmission or receipt of messages that effect, enable, facilitate or sequence the making of payments or the transfer of funds. This includes systems using non-monetary digital assets for payments, or that provide services facilitating a payment being made, as well as 'three party' or 'closed loop' systems1. Given a very broad definition of 'system', and a clear intention that messaging-only systems, and arrangements which are only a part of a broader arrangement may be 'payment systems', the definition may have unanticipated consequences. A very great number of common activities and structures may be 'payment systems' if carried on by a 'constitutional corporation', and subject to Ministerial designation. The Explanatory Memorandum includes detail of various kinds of arrangements that are now intended to be captured by the new definition but does not consider whether or how the new definition is limited. For example, every constitutional corporation with an accounts payable function, might be regarded as a 'payment system' operator for that reason only, even though the prospect of designation may be low. If the corporation has a separate payroll function, that could be a separate payment system. | As currently drafted, 'payment system' is narrowly defined to the circulation of money and can be interpreted to include multilateral arrangements where there are multiple participants operating under a set of common rules. |
| Participant will be redefined to capture all entities involved in the payments value chain (ie, all parties that are involved in processing a financial transaction will be deemed a participant). If an entity provides: • BNPL products; • digital wallet services (such as ApplePay and Google Wallet); • cash distribution services; or • services that facilitate crypto assets (such as payment stablecoins), and the services facilitate the making of payments or transfers of funds, which enables the participation of a consumer in a payment system (such as Visa or Mastercard schemes), then this entity would be deemed a 'participant'2. Again, the very broad definition could have unanticipated consequences. The Explanatory Memorandum notes that entities which are indirectly connected with a payment system will be treated as 'participants'. Combined with the very broad definition of 'payment system', this raises the prospect that many constitutional corporations in Australia could technically be payment systems and also be participants in dozens of other payment systems. Ostensibly, facilitative services which are not payment related could be sufficient to make the provider a 'participant', if the provider is a constitutional corporation. If the sole implication of being a participant, is the prospect of designation in the national interest, this may merely be inelegant but without material adverse consequences. If, however, future reforms impose obligations on payment systems and participants, the (in our view) overly broad definitions may need to be substantially curtailed. | Participant is currently interpreted as including only entities that are formal members of a payments system, and which are subject to the rules that govern the operation of that system. |
| The Financial Services Minister will be empowered to designate payment systems in the national interest via a notifiable instrument. While administrative in nature, such designation facilitates regulatory oversight without imposing direct legal obligations on entities. The Minister may also appoint a special regulator and issue binding directions regarding regulatory priorities. The nominated regulator will be authorised to impose access regimes, set compliance standards, and issue directions where non-compliance is identified. | No such powers existed under the previous iteration of the PSRA. |
| The RBA will be able to accept enforceable undertakings relating to matters in relation to which the RBA has a function or power under the PSRA, regulations or other legislative instruments made under the PSRA. | No such equivalent power previously existed. |
| The amended PSRA will contain a civil penalty framework which relies on the standard framework from the Regulatory Powers Act, to the extent possible. The RBA and nominated regulator (explained above) can apply for a civil penalty order where a direction issued is not complied with, intending to deter non-compliant behaviour. | No equivalent civil penalty framework previously existed. |
| The maximum penalties for specific criminal offences in the PSRA will increase to reflect the gravity of the misconduct and to be comparable with penalties for similar offences in other frameworks. This is a similar framework to that which has led to penalties exceeding $1 billion being imposed for breaches of anti-money laundering laws. | Previously, the maximum penalties for some criminal offences in the PSRA did not reflect the seriousness of the conduct. |
This article was written by Michael Anastas, Partner, James Moore, Partner, Mizu Ardra, Partner, Byron David, Special Counsel, Will Gallett, Solicitor and Sophia McCarthy, Law Clerk.
1 Note that ‘closed loop’ refers to a system that consists of bilateral arrangements between an entity and payers and payees which use the system, whereas a ‘three party’ is a system where one entity (the card scheme) performs both the acquirer and the issuer roles – American Express and Diners Club are both examples of this. ‘Messages’ it is proposed, would include payment instructions, authorisation messages and token keys used in the process of making or receiving payments.
2 Stand-alone retailers and merchants that merely sell goods and services and who are not part of the payment system, will not be captured within this definition.
Subscribe for publications + events
HWLE regularly publishes articles and newsletters to keep our clients up to date on the latest legal developments and what this means for your business. To receive these updates via email, please complete the subscription form and indicate which areas of law you would like to receive information on.
* indicates required fields