Global Regulation Tomorrow

On 12 March 2026, the Australian Treasury issued tranche 1 exposure draft legislation intended to modernise the regulatory framework for payment service providers (PSPs).

Background

Several reviews, including the 2021 Review of the Australian Payments System, have found that the regulatory architecture for PSPs in Australia is no longer fit for purpose. Such reviews have made recommendations to address this.  Subsequently, draft legislation for reforms has been released in two sub-tranches. Tranche 1a draft legislation, covering core concepts and licensing obligations, was consulted on from 9 October to 6 November 2025. 51 submissions were received.

Exposure drafts

Treasury has now issued exposure drafts covering the full package of legislation for tranche 1 comprising:

• Treasury Laws Amendment Bill 2026: Payment Systems Modernisation.
• Treasury Laws Amendment (Payments System Modernisation) Regulations 2026.
• Payment Entities (Prudential Regulation) Bill 2026.
• Payment Entities Supervisory Levy Imposition Bill 2026.
• Authorised Non-operating Holding Companies Supervisory Levy Imposition Amendment Bill 2026.

The draft Bills includes adjustments to Tranche 1a draft legislation as previously consulted on and detailed policy elements not covered in Tranche 1a. The draft regulations are an early and partial draft designed to assist stakeholders in understanding the proposed regulatory perimeter. The draft regulations will be expanded upon to cover other policy elements.  

The Bills

The Bills amend and enhance the regulatory framework to capture new types of financial products and services and ensures the Australian Financial Services (AFS) licensing requirements as applied to PSPs is tailored to the specific nature of the different PSPs operating in Australia and the financial services products and services they provide.

In particular, the Bills introduce certain reforms including:

• The purchased payment facility (PPF) regime will be repealed and replaced by AFS licensing requirements for stored value facility (SVF) providers. Major SVF providers will also be required to register with the Australian Prudential Regulation Authority (APRA), and APRA will be given new powers to monitor and regulate these entities to manage broader financial stability risks to the Australian financial system.
• The Minister will be empowered to make a new, mandatory ePayments Code, which will apply minimum standards of consumer protections to PSPs, authorised deposit-taking institutions (ADIs), and payment participants under the Payment Systems (Regulation) Act 1998 (Cth).
• New requirements to safeguard payment-related money will help ensure payment-related money held by licensees is available to complete transfers of non-cash funds or be returned to the person who is entitled to it.
• A process for managing dormant money held with major SVF providers will enable these providers to deal with this type of unclaimed money and support return of stored funds to consumers.

The first exposure draft of the Bill focussed on introducing new, defined types of financial products and services provided by PSPs and updating the AFS licensing framework as applied to PSPs to ensure it is tailored to the specific nature of the different PSPs operating in Australia and the financial products and services they provide.

These latest exposure drafts include certain amendments to the definitions to reflect stakeholder feedback and also introduces:

• New requirements to safeguard payment-related money held by AFS licensees.
• A new process for managing inactive and dormant money (also referred to as ‘unclaimed money’) held with major SVF providers.
• A rulemaking power for the Minister to make a new, mandatory ePayments Code.
• New ongoing disclosure obligations on tokenised SVF providers.
• Other amendments relating to exemptions and exclusions from the AFS licensing framework, and transitional arrangements.

It also includes an exposure draft of the Payment Entities (Prudential Regulation) Bill 2026, which is a new act to empower APRA to prudentially regulate providers of SVFs, including tokenised SVFs, that operate at a scale that may present risks to the stability of the Australian financial system.

Regulations

The draft Treasury Laws Amendment (Payments System Modernisation) Regulations 2026 make consequential amendments to a range of legislative instruments to ensure consistency with the introduction of new PSP terms and definitions and remove or replace references to ‘non-cash payment’, ‘purchased payment facility’ and ‘non-cash payment facility’, where appropriate.

The draft regulations also introduce tailored definitions, exclusions, exemptions and transitional arrangements for certain low risk payment products and services. They also incorporate the effect of ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211, which provides exemptions from various obligations of the existing regulatory framework for certain ‘non-cash payment facilities’. Finally, the draft regulations include various transitional arrangements to ensure the amendments apply consistently with the broader reforms.

Next steps

The deadline for comments on the exposure drafts is 9 April 2026.