TransferWise picks up APRA licence, steps up Australia push
Richard Branson-backed TransferWise hopes APRA’s limited licence will be a ‘springboard’ for its products and operations.
Richard Branson-backed payments group TransferWise has secured a limited licence from the banking regulator, giving it greater access to the Australian market which it hopes will act as “a springboard” for its products and operations.
TransferWise’s purchased payment facility (PPF) licence - a special class of deposit-taking institution that can undertake a limited range of banking activities - was announced by the Australian Prudential Regulation Authority on Monday.
It is the first such licence issued in more than a decade after global giant PayPal received one.
TransferWise, a global technology-led money transfer and foreign exchange firm, will still use Macquarie Group, JPMorgan and Monoova as banking partners, given the PPF licence does not make it a fully-fledged domestic bank.
APRA granted the licence so that TransferWise can provide purchased payment facilities as a limited authorised deposit-taking institution under the Banking Act.
TransferWise Australia country manager Tim Cameron said it had taken two years and a “long process” to secure the licence.
“But it‘s great to come to the end of the journey,” he added.
“The steps we have taken today which include taking on the additional regulatory requirements, is driven by our commitment to Australia, our mission, and to setting a new global standard to give millions access to truly competitive services, even if regulations have not kept up with the new breed of services fintechs provide.
“By becoming independent and cutting out the middleman, we’ll be able to save our customers even more money.”
The limited licence doesn‘t provide funds held with TransferWise the protection bank deposits of up to $250,000 receive per account holder, under the federal government’s Financial Claims Scheme. But TransferWise will need to hold liquid assets against amounts held with its local entity.
The new licence for TransferWise comes ahead of a watershed year in 2021 for the domestic payments sector, as BPAY, eftpos and the New Payments Platform (NPP) mull a merger and separate reviews are conducted by Treasury and the central bank.
Mr Cameron said TransferWise was engaged with all the local reviews and it was important any changes “promoted competition and better consumer outcomes”.
The new APRA licence would assist TransferWise’s growth plans for Australia.
“This is really a springboard for future product improvements,” Mr Cameron added.
TransferWise is also applying for a settlement account with the Reserve Bank as it seeks direct access to the NPP, which facilitates real-time payments.
Mr Cameron expressed some frustration with Australia’s licencing regime and the efforts the fintech has had to make to seek out direct access to payments infrastructure.
“No where else in the world do you need to be licenced to such a degree,” he said. “Whatever comes from it (payment sector reviews) it needs to be very focused on opening up access.... we just want to see an appropriate level of access for upcoming firms.”
TransferWise - processes more than £4.5bn in cross-border transactions every month - is looking for similar access in other payments markets around the world.
In 2018, it became the first non-bank to get direct access to the UK’s Faster Payments Scheme and to hold a settlement account with the Bank of England. This allowed the company to make transfers to and from the UK instant, in less than 20 seconds, as well as lower prices.
TransferWise also has direct access to the SEPA system in the European Union and has integrated with the Hungarian Central Bank, delivering direct access to the local instant payment system in that market.
There may, however, be changes coming to the Australian licencing regime for fintech players.
In an in-depth report, the Council of Financial Regulators has made a number of recommendations on stored-value facilities. Among its recommendations was the introduction of a new class of local regulated product, replacing purchased payment facilities in the regulatory framework, so that regulation is “graduated and commensurate with risks to consumers”.
Opaque fees for money transfers and foreign exchange services have also proven a sore point in this market, with the RBA and Australian Competition and Consumer Commission separately expressing concerns about fees and mark-ups charged by banks.
TransferWise in October urged the federal government to introduce laws forcing transparent pricing of cross-border money transfers, to ward against big banks overcharging.
In late 2019, TransferWise Australia appointed Mr Cameron as country manager and named Venkatesh Saha, its head of Asia Pacific expansion, an executive director.
Justyn Walsh, a former Macquarie Capital managing director and BridgeLane Agriculture boss, took the reins as local chairman.
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