- The Australian government is introducing new laws that will increase control of digital payment systems provided by internet companies
- Wallets such as Apple Pay were used more often than traditional wallets by customers
- There has been a significant drop in the use of cash for in-store payments.
New Rules for Tech Giants
Digital payments are transactions that take place through digital or internet techniques. Virtual cards, wire transfers, and digital wallets such as Apple Pay, Google Pay, and other wallets facilitate these transactions. Governments around the world are pushing for digital payment systems because they want to promote transparency in monetary transactions between people. They also want to enhance the management of digital payments. For instance, the Australian government is proposing new rules that would strengthen the regulation of digital payment services provided by internet giants such as Apple and Alphabet’s Google.
Treasurer Josh Frydenberg said he would “carefully consider” that and other recommendations from a government-commissioned assessment on whether the payments system had kept pace with developments in technology and changes in consumer demand.
Services such as Apple Pay, Google Pay, and China’s WeChat Pay, which have exploded in popularity in recent years, are not currently designated as payment systems, leaving them outside the regulatory framework. “If we don’t alter the current framework, Silicon Valley alone will determine the future of our payments system, a crucial component of our economic infrastructure,” Frydenberg stated in an editorial piece published in the Australian Financial Review.
Digital Wallets Surpassing Cash Payments
The Australian report advises that the government be granted the right to designate tech companies as payment providers and to build a strategic plan between government and industry for an integrated licensing framework for payment systems to be implemented. The Reserve Bank of Australia announced that payments through digital wallets have climbed to 8% of in-person card transactions in 2019, up from 2% in 2016.
In March, according to a study by FIS, customers employed their digital wallets, such as Apple Pay, more often than their conventional wallets while paying in-store. For the first time, payments using mobile digital wallets overtook cash payments on in-store purchases on a global basis last year. As reported by the study, cash usage dropped 10% in 2020 to account for only one-fifth of all face-to-face payments worldwide. In Canada, the United Kingdom, France, Norway, Sweden, and Australia, the use of cash for in-store payments has decreased by half or more.
Currently, it is unclear when or how Australia will apply these new regulations and how firms like Apple, Google, and WeChat will respond. However, the crucial point here is how this new legislation could assist customers and businesses rather than stop the growth of digital payment services.