Download files
Abstract
This Thesis examines stored value facility regulation in Australia and compares it to that in Hong Kong and Singapore. It concludes that in its current form, Australia's stored value facility regulatory regime is unnecessarily complex, does not provide sufficient competitive neutrality between issuers nor adequately support innovation, and the application of its consumer protection provisions is uncertain.
Stored value payment methods have the potential to be a significant source of competition to traditional payment methods, but the existing regulatory regime in Australia limits their ability to grow.
Existing stored value legislation is no longer adequate; time, innovation and the emergence of non-bank issuers has led to the need for revision of old legislation and in some cases new legislation. A flexible regime is needed to effectively capture and regulate all products. This Thesis proposes that a regime with two prudential tiers and a third non-prudential tier, separate from the existing ADI regime, is the best model for stored value facilities in Australia. The upper tier should capture those products determined to be large and widely used. The second tier should capture those products with lower value that are sufficiently large enough to require some level of prudential regulation. The third tier should apply consumer protection provisions to products operating between the low value exemptions and the prudential tiers. The existing regulatory exemptions for limited-use facilities should remain.
Regulation should allow products to graduate from the exemptions and between the tiers as appropriate. ASIC's ePayments Code should be made mandatory for all stored value facility issuers. The use of clear and transparent criteria to determine the appropriate regulatory tier should remove the need for the RBA's system of declarations. To monitor developments in the market and assess the impact and compliance burden of existing regulation, an organisation such as the Council of Financial Regulators should take on a coordinating role for the stored value regulators.
The regulatory regime proposed in this Thesis provides greater clarity, competitive neutrality, support for innovation and consumer protection within stored value facility payments in Australia.