The federal government has launched a review into the regulatory architecture of Australia's payments system, amid ongoing talks around the proposed merger of the country’s three major payments infrastructure providers.

Treasurer Josh Frydenberg announced the review on Wednesday as part of the government’s role in the $797 million digital business plan to look at ways to ensure the system is “fit for purpose and responsible for advances in payments technology”.
It comes several months after the Reserve Bank of Australia postponed its root-and-branch review of Australia’s retail payments regulation until 2021 as a result of the coronavirus pandemic.
Led by King & Wood Mallesons partner and consumer rights expert Scott Farrell, the review will consider whether the country has the right balance of industry self-regulation, regulators and government in the post-Covid world.
This includes assessing whether the regulatory framework “adequately accomodates new and innovative systems” and looking at ways to create more “competition in the payments system”, including in relation to the New Payments Platform (NPP).
It follows a massive increase in digital payments across a range of different platforms during the pandemic, with businesses and consumers ditching polymer for contactless means of payment.
“The regulatory architecture that applies to these new technologies, businesses and products have served us well, but have remained largely unchanged for over two decades,” the review’s terms of reference state.
“This review would look at the roles of industry self-regulation, regulators and the government and consider whether the balance is right in promoting competition, innovation, efficiency, resilience and stability of the system.”
Government payment systems, including payments to citizens, will also come under the microscope in order to understand whether they are “agile and can take advantage of new payments functionality, to enhance service delivery”.
Recent developments in this space include a two-year project by the Department of Finance to bring real-time settlement to government agencies using the NPP, giving them access to urgent funding during business hours or on the weekend.
The review, which will take place over the next five months, comes as BPAY, eftpos and NPP Australia continue talks over a once-in-a-generation consolidation that was revealed earlier this year.
The proposal, put forward by NPP Australia, would see the creation of a single industry-wide payments platform along similar lines to the United Kingdom and Singapore, which the Commonwealth Bank and ANZ have backed.
While there is no timeframe for the proposed merger, it is now unlikely any decision will be made until the review - which is only expected to be provided to the government by April 2021 - is released.
Last week, the Australasian Association of Convenience Stores advocacy group rallied against the proposal, arguing it will "diminish compeitition" and likely result in an increase in the cost of processing transactions.
The review is expected to take global best practice and trends into account and draw on views from industry, consumer and privacy advocates to ensure the payments system remains competitive.
Frydenberg said it is “critical that the regulatory architecture supporting our payments system promotes innovation and competition to ensure that costs to business are minimised, consumer experience is enhanced and there is confidence in the security of the system”.