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The new governor of the Reserve Bank of Australia (RBA) has put mobile wallet regulation high on her list of priorities, but the finer details of the rules have yet to be decided.

On Tuesday (December 12), newly-appointed RBA governor Michele Bullock  her plans to modernise Australia's payment system in 2024 and beyond.

Bullock was speaking at the Australian Payments Network (AusPayNet) Summit in Sydney, in one of her first speeches following her appointment as governor in September.

She said her top three priorities will be strengthening the resilience of Australia’s payments and market infrastructures; advancing and implementing the government’s payments reforms; and promoting competitive, cost-efficient payments.

Under the second strategic priority — advancing and implementing reforms — Bullock noted that Australia’s Payment Systems (Regulation) Act 1998 will be amended “sometime” in 2024.

As covered by ����žž, the amendments will ensure that newer players such as mobile wallet and buy now, pay later (BNPL) providers will be regulated as payment system “participants” for the first time.

Once the reforms are in place, Bullock said the RBA will then launch a “holistic review of retail payments regulation” to help “set our regulatory priorities” in the “expanded regulatory perimeter”.

The outcome of the review will finalise the details as to what mobile wallets, BNPLs and other newcomers may or may not do as payment system “participants”.

Among the issues that will be looked at in the review are the costs associated with mobile wallet payments — an area that Bullock said “remains opaque”.

Also under consideration will be surcharges on BNPL payments and formal regulation to ensure that payment service providers (PSPs) enable least-cost routing.

The 'Big Four' versus bigtech

With a new legal framework soon to be in place, the long-running battle between Australia’s "Big Four" (Commonwealth Bank, NAB, Westpac and ANZ) banks and bigtech mobile wallets may be coming to an end in 2024.

The battle has been fought primarily over fees and revenue, but ����žž’s sources say that data and access rights are also key elements in the fight.

The battle dates back to 2016, when Australian banks were prohibited by the competition regulator from forming a cartel to enable collective bargaining over access to Apple Pay.

Of the banks, only ANZ rejected the cartel and began negotiating with Apple privately. 

Although the rest were sanctioned by the competition commission, ANZ went on to launch Apple Pay in 2016, and remained the only Australian bank to offer Apple Pay for several years.

Over time, however, as demand for mobile payments increased, the rest of the "Big Four" fell into line.

Commonwealth Bank (CBA), the largest card issuer in Australia,  Apple Pay in January 2019. National Australia Bank (NAB)  in May 2019 and Westpac  in April 2020.

'Opaque' fee structure

Despite having brought all of Australia’s largest banks on board, the fees that Apple charges card issuers for Apple Pay transactions are still a closely-guarded secret.

Sources who spoke with ����žž said that Apple is “rumoured” to charge as much as 3 basis points per transaction.

In December 2022, the Australian Financial Review  that Apple generates A$110m in fees annually from Australian banks through Apple Pay.

If correct, this would mean that CBA, which issues about 30 percent of cards in Australia, is losing somewhere in the region of A$33m per year to Apple.

Brad Kelly, managing director of Australia’s Payment Services consultancy, said that with the promise to bring mobile wallets into payments regulation, CBA and others may have finally “got what they wanted”.

“Apple has CBA under a watertight non-disclosure agreement,” he told ����žž. “But CBA wanted to have control over Apple.”

New challenges

Although the details of the RBA’s mobile wallet regulations are to be decided, Kelly added that Apple Pay today has even greater leverage over the banks than it did in 2016.

For example, he pointed to Apple’s latest open banking feature in the UK as a potential encroachment on mobile banking territory.

Launched last month, a  allows users to connect their debit and credit cards to the Apple Wallet, where they can view balances, transaction histories, deposits and withdrawals.

“By enabling users to conveniently access their most useful account information within Wallet, they can make informed financial decisions and better understand and manage their spend,” said Jennifer Bailey, vice president of Apple Pay and Apple Wallet.

In 2024, the RBA will also have to grapple with features such as these in its efforts to level the playing field between the banks and mobile wallet providers.