PayPal calls for e-payments code to be compulsory

PayPal wants Apple and all other companies offering digital wallets to be compelled to adhere to the Australian Securities and Investments Commission's e-payments code of conduct before being allowed to set up shop in Australia.

While the e-payments code, which provides a level of consumer protection, has already been widely adopted by conventional financial institutions and a raft of online payments providers, it remains voluntary. PayPal - which signed up for the code in 2011 - now wants the code mandated.

The company, which claims to have almost six million active users and 110,000 merchant partners in Australia, has also called for all other digital wallet companies to be regulated as purchased payment facilities by the Australian Prudential Regulation Authority, as is the case for PayPal.

The company, however, hired Deloitte Access Economics to analyse its operational model in order to provide additional firepower for its argument that it not be subject to the same level of regulation as the credit card companies because its operational model differs from theirs.

While PayPal is happy to continue to be regulated by APRA as a limited authorised deposit-taking institution, it rails against any suggestion that it be subjected to regulation under the Payment Systems (Regulation Act) 1998 (PSRA).

Finally, PayPal called for digital currencies such as BitCoin to be regulated as a financial instrument by ASIC. That would prompt a rethink by the Australian Taxation Office, which currently views such currencies as an asset, used for barter-style payments.

Not that there's much of a rush for PayPal Australia to use digital currencies. Kareem Al-Bassam, director of customer experience and solutions, confirmed that, unlike the US where PayPal customers can make payments in Bitcoin, this facility is not yet available in Australia nor were plans to allow local digital currency payments "very well developed."

While the company's focus yesterday was on its response to the FSI recommendations, PayPal has faced international regulatory glare this month following settlement of US Treasury charges associated with payments made through the system in violation of sanctions programs.

Al-Bassam said that, once it identified the problem, PayPal itself raised the issue with the US authorities.

According to the company, before April 2013 it did not have systems able to scan payments in real time in order to block prohibited payments. It claims that the introduction of new payments monitoring systems subsequently identified 486 transactions worth $US43,934 which were processed in possible violation of sanctions between 2009 and 2013, which were then brought to the attention of the US authorities.