[email protected]
WhatsApp +44 7563 115980
Telegram @buckinghamcapital
Australia is rewriting how payment businesses are regulated. Under the Treasury's Payments System Modernisation reforms, firms performing defined payment functions would need an Australian financial services (AFS) licence from the Australian Securities and Investments Commission (ASIC). The reforms replace the old concept of a non-cash payment facility with a list of payment functions, and add prudential supervision by the Australian Prudential Regulation Authority (APRA) for the largest stored value providers.
Treasury released the full first tranche of draft legislation for consultation from March to April 2026. As at late October 2026, no bill had been introduced to Parliament. The regime would commence 12 months after the legislation receives Royal Assent, so firms have time, but not much once the bill moves.
The reforms matter well beyond Australia. Many of the providers affected are overseas groups: international remittance firms, global card issuers, wallet providers and stablecoin issuers serving Australian customers. Each will need to decide whether to license in Australia, partner with a local licensee or narrow its Australian offer.
| Function | Examples |
|---|---|
| Stored value facility | Digital wallets holding a balance, prepaid cards |
| Tokenised stored value facility | Payment stablecoins |
| Payment instrument | Debit and credit cards, direct debit, PayTo |
| Payment initiation service | Pay by bank initiated on the customer's behalf |
| Payment facilitation service | Merchant acquiring, remittance |
| Payment technology and enablement service | Payment gateways, pass-through digital wallets |
| Cross-border transfer service | International money transfers |
A firm that performs any of these functions for Australian customers would need an AFS licence covering it, unless an exemption applies.
The draft regulations include exemptions for lower-risk activity:
These are draft figures and may change before the law is made. A firm relying on an exemption should model its volumes for growth, because exceeding the threshold would require a licence.
Groups should add up balances and volumes across related companies when testing the thresholds, as the draft does.
Stored value facility providers would not be allowed to pay interest or interest-like benefits on balances. Providers of tokenised stored value facilities, in effect payment stablecoin issuers, would have to honour redemption without unreasonable restrictions, publish notices of material changes and publish a monthly statement of reserve assets within seven days of month-end in a form set by ASIC. Money held for customers would by default be held on trust with an authorised deposit-taking institution.
Providers with stored value above about A$200 million on a group basis would also come under APRA's prudential regime, with standards set by APRA and powers to intervene if a provider gets into difficulty. They would not become banks and would not need an APRA banking licence.
| Stage | Position as at late October 2026 |
|---|---|
| Tranche 1a exposure draft | Released October 2025, consultation closed November 2025 |
| Full Tranche 1 exposure draft | Consultation 12 March to 9 April 2026 |
| Bill in Parliament | Not yet introduced |
| Commencement | 12 months after Royal Assent |
| Existing licensees with non-cash payment authorisations | One month to apply for a streamlined variation |
| Other payment providers | Six months to apply for a licence or variation |
Under the draft, ASIC could not refuse a complete streamlined variation application from an existing licensee within the one-month window. Everyone else would need a full assessment, so the six-month window is short for a firm starting from scratch.
Treasury has also signalled a second tranche covering common access requirements to payment systems and a possible standard-setting body, to follow once the first tranche is enacted. Firms that rely on access to Australian payment systems through a sponsor should follow that tranche closely, because it may change the terms on which they connect.
AFS licensing sits alongside anti-money laundering regulation, not in place of it. Remittance providers and digital currency exchanges register with AUSTRAC, Australia's financial intelligence agency, and the reformed AML/CTF Act brought new obligations from 31 March 2026 for existing reporting entities and from 1 July 2026 for newly regulated businesses. A payment firm will typically need both an AFS licence under the new regime and AUSTRAC registration. Our guide to AUSTRAC remittance and VASP registration covers the AML side.
The AUSTRAC timetable also matters for planning: existing reporting entities had to notify AUSTRAC of their AML/CTF compliance officer by 30 May 2026, and newly regulated businesses by 29 July 2026. A firm building its AFS licence file should make sure its AML programme, compliance officer and governance tell the same story in both places.
An AFS licence application to ASIC covers the business description and the financial services to be authorised, responsible managers with the right experience, organisational competence, financial resource requirements, compliance arrangements, risk management, dispute resolution including membership of the Australian Financial Complaints Authority, and compensation arrangements. For payment firms, ASIC will also look closely at how customer money is held and how technology and outsourcing are managed.
Preparing the file takes months, and ASIC's assessment adds more. Firms that start once the bill passes risk running out of time in the six-month window. Our Australia AFS licence page sets out ASIC's requirements.
Overseas applicants should also plan for an Australian registered company or registered foreign company, a local address for service and, in many cases, local staff or directors who can engage with ASIC directly.
Remittance providers and foreign exchange firms are among the most affected. Many currently operate with AUSTRAC registration alone, because their services were not treated as financial products requiring an AFS licence. Under the reforms, payment facilitation services, which include remittance, and cross-border transfer services become licensable payment functions. A remittance firm that has never held an AFS licence will need to build the governance, responsible managers and compliance arrangements ASIC expects.
For international firms serving Australian customers from overseas, the question is whether to hold a licence in Australia, use an authorised representative arrangement with a licensee, or partner with an Australian provider. The answer depends on volumes, the services provided and how the customer relationship is structured.
Digital wallet providers and prepaid card issuers currently rely on a mix of ASIC relief and the old non-cash payment facility rules. Under the reforms, stored value facilities become a defined payment function with clear rules on interest, redemption and how customer money is held. Issuers of payment stablecoins would be regulated as tokenised stored value facilities, with monthly reserve statements and redemption rights.
For stablecoin issuers, this sits alongside the separate digital asset platform regime Australia is introducing for exchanges and custodians. Our guide to the Australian digital asset platform licence covers that regime. An issuer that also operates a trading platform may need to address both.
ASIC assesses each responsible manager's knowledge and experience against the services the licensee will provide. For payment firms, that usually means people with direct experience of payments operations, compliance or risk in a regulated setting. Overseas groups often underestimate this requirement. Identifying suitable responsible managers, and where needed recruiting them in Australia, is one of the longest parts of preparing an application, so it should start early.
Under the proposals, licensees holding payment-related money would by default hold it on trust with an authorised deposit-taking institution, a bank or similar. Firms that today hold customer money in ordinary operating accounts, or with overseas banks, should plan how to move to compliant arrangements, including the trust deed, the account structure and daily reconciliation. This is similar in principle to safeguarding in the UK and EU, and firms with experience of those regimes can adapt their processes, but the legal structure is different and needs Australian advice.
For a UK, European or Asian payment firm planning to serve Australian customers, the reforms change the entry decision. Under the current rules, some business could be done with limited licensing. Under the new regime, a firm performing a payment function for Australian customers would need an AFS licence, an authorised representative arrangement, or an exemption. The choice affects cost, time to market and control of the customer relationship, so it should be made before the firm commits to Australian launch dates. Firms should also plan for AUSTRAC registration and the reporting that comes with it.
We map payment businesses against the new functions, prepare AFS licence applications and AUSTRAC registrations, and help overseas payment firms structure their Australian entity, responsible managers and banking. Our AUSTRAC registration service covers the anti-money laundering side.
Under the draft reforms, yes: firms performing defined payment functions, including stored value, payment initiation, acquiring and remittance, would need an AFS licence unless exempt.
Twelve months after the legislation receives Royal Assent. As at late October 2026, no bill had been introduced to Parliament.
Yes. Tokenised stored value facilities, in effect payment stablecoins, are a defined payment function with their own redemption and reserve disclosure rules.
About A$200 million of stored value on a group basis, under the proposals.
Draft exemptions cover low-value stored value facilities, low-value payment instruments and payment services with average monthly transfers of no more than A$8 million.
No. Payment firms will typically need both.
Get in touch: WhatsApp +44 7563 115980, Telegram @buckinghamcapital or [email protected].
This article is general information, not legal advice. Requirements change, and the regulator’s own publications take precedence.
Tell us where you are and where you want to be.
[email protected]
WhatsApp +44 7563 115980
Telegram @buckinghamcapital