The payments system overhaul: PSP licensing reform explained

Australia's "payment licensing reform" is the Federal Government's modernisation of how payment service providers (PSPs) are regulated. In short: the outdated, product-based "non-cash payment facility" (NCPF) concept is being replaced with a technology-neutral, activity-based regime that brings a much wider range of payment businesses under the Australian Financial Services Licence (AFSL) framework in the *Corporations Act 2001* (Cth). If your business initiates, facilitates or enables payments — including digital wallets, payment gateways and stored-value products — you will likely need to hold or vary an AFSL, and some providers will also face prudential oversight by APRA.

This is the most significant overhaul of payments regulation in roughly two decades. It is being delivered through the Treasury's Payments System Modernisation program. Below is a neutral, citation-first summary of the substance, who it touches, and what to do. For the obligation record, see PSP licensing reform 2025.

What the payment licensing reform actually does

The core change is a shift from regulating *products* to regulating *activities*. Under the existing law, payment arrangements have been captured (unevenly) through the NCPF concept, which has struggled to keep pace with modern payment technology. The reform removes that concept and introduces a defined notion of a "payment service" as a financial service under the Corporations Act 2001.

The practical effect is that providers performing defined payment functions are pulled into the AFSL regime administered by ASIC, rather than relying on patchy exemptions. Treasury has indicated the framework will distinguish between major stored-value facility (SVF) providers and "designated" PSPs, with graduated obligations rather than one uniform rule set. Note that several elements of the detailed licensing framework have moved through Treasury as exposure draft legislation and successive tranches, so providers should confirm the enacted position before relying on any single design feature.

Who the new regime captures

The regime is deliberately broad. It is intended to capture businesses across the payments "stack" that previously sat outside, or only partially within, financial services licensing. Indicative categories of provider include:

• Payment initiation services — businesses that initiate a payment on a user's instruction (for example, pay-by-bank and account-to-account initiation).
• Payment facilitation services — acquirers, payment facilitators and gateways that process or route transactions between parties.
• Payment technology and enablement services — providers of the technical infrastructure that enables payments, such as tokenisation and certain wallet services.
• Stored-value facilities (SVFs) — products that hold customer funds for later payment, including some digital wallets and currency-backed stablecoin arrangements.

If you currently operate under an NCPF authorisation, an exemption, or an arrangement with a licensed partner, you should not assume your status carries across unchanged. The activity-based test means the question is *what you do*, not how your product was historically labelled. This connects closely to the broader fintech, payments and crypto regulatory landscape, where stored-value and stablecoin products are receiving particular attention.

The new categories: payment services and SVFs

Two concepts sit at the centre of the reform.

Payment service. The reform introduces "payment service" as a defined financial service. Performing a payment service generally triggers AFSL obligations — including the obligation to act efficiently, honestly and fairly, to manage conflicts, to maintain adequate resources and risk systems, and to meet conduct and disclosure requirements that apply to AFS licensees.

Stored-value facility (SVF). SVFs replace and modernise the way stored-value products are treated. An SVF holds value (customer funds) that can be drawn down to make payments. The reform is designed to be technology-neutral so that it captures both traditional stored-value products and newer forms such as tokenised stored value, where appropriate.

The significance is that a single business may perform several functions at once — for example, operating a wallet (an SVF) while also facilitating payments — and may therefore need authorisations covering each relevant activity.

APRA's prudential layer for SVFs and designated PSPs

Beyond AFSL conduct licensing, the reform adds a prudential dimension. APRA is expected to supervise major SVF providers and certain designated PSPs under a prudential framework, in addition to ASIC's conduct role.

Treasury materials have referred to a proposed threshold under which SVF providers holding stored value above a specified minimum (an amount in the order of AUD $200 million has been discussed in consultation) would be required to register with APRA and meet prudential requirements such as capital and liquidity standards. Treat that figure as indicative and verify the current threshold with APRA or Treasury before relying on it, as thresholds set during consultation can change before commencement.

The dual-regulator model means larger or systemically relevant providers will face two streams of obligation — conduct (ASIC) and prudential (APRA) — while smaller providers may sit within the AFSL conduct regime only.

Timing, tranches and transitional arrangements

The reform is being delivered in stages. Treasury has progressed the framework through consultation and exposure draft legislation, including a Tranche 1 consultation that ran from 9 October to 6 November 2025, with further tranche material released for consultation in 2026 covering matters such as common access requirements and an industry standard-setting body.

Commencement is expected to occur after a transitional period rather than immediately on assent, with implementation widely anticipated to land in 2027 subject to final legislation and transitional rules. Because the precise commencement date and transitional length depend on the enacted instruments, you should confirm the operative dates against the Federal Register of Legislation rather than relying on commentary.

What payment businesses should do now

Even before final commencement, affected businesses can take concrete steps:

• Map your activities against the payment service and SVF definitions. Identify every function you perform across initiation, facilitation, enablement and stored value.
• Assess your current authorisations — AFSL, NCPF status, exemptions or reliance on a licensed partner — and identify gaps.
• Estimate prudential exposure. If you hold customer funds, model whether you could approach any APRA registration threshold.
• Engage with the consultations and drafts so your licensing application is ready when timing firms up.
• Review related obligations, including the ePayments Code, which governs electronic payment conduct and consumer protections and intersects with the new regime.

Common pitfalls and misconceptions

• Assuming you are exempt. The activity-based test narrows reliance on legacy exemptions. Past NCPF or "no licence needed" positions should be re-tested.
• Treating draft figures as settled. Thresholds (including the SVF registration amount) and commencement dates have moved through consultation and may change — cite the enacted instrument, not commentary.
• Overlooking the dual-regulator split. Conduct (ASIC) and prudential (APRA) obligations are distinct; meeting one does not satisfy the other.
• Ignoring the ePayments Code. Consumer-facing payment conduct rules continue to apply alongside licensing.
• Leaving applications late. AFSL variations and new applications take time; transitional windows are finite.