A more complex payments future means Aotearoa needs clearer rules

A clear payment services framework is needed to shape how Aotearoa New Zealand supports innovation, productivity, competition and customer trust. It also matters commercially.

Payment Service Providers (PSPs) need clear rules so they can invest, launch and scale with confidence. Banks, partners and investors need a common reference point for assessing provider risk. Customers and businesses need to understand what protections apply when they pay, get paid, hold value or use new payment services.

At McCallum&Co, our starting point is simple: payment regulation should reflect the customer experience. Provider types, legal structures and payment rails do not matter directly to customers. However, they expect payments to work safely, transparently and reliably, and they expect someone to be accountable when things go wrong.

At present, New Zealand has important baseline obligations across financial service provider registration, dispute resolution, fair dealing and AML/CFT. But these obligations do not yet amount to a coherent payment services framework.

The result is uncertainty. Similar-looking services can carry different protections depending on who provides them, how customer value is held, which payment rail is used, and where responsibility sits in the payment chain.

That uncertainty can slow innovation, weaken trust and make it harder for PSPs to enter or grow in Aotearoa.

It can also create practical friction: repeated due diligence, inconsistent bank onboarding expectations, investor uncertainty and duplicated assurance. In a small market like New Zealand, that matters. It can affect whether a provider launches here, scales here or prioritises another market first.

This is the central point of McCallum&Co’s submission to MBIE’s Payment Services Regulation consultation.

Aotearoa has an opportunity to create a clearer, more modern and proportionate framework for payment services; one that supports innovation, improves confidence, and reflects how payments are actually experienced by customers and businesses.

Key themes from our submission

1. Regulation should be activity-based, not provider-based

Future rules should apply based on what a provider does, not what type of organisation it is.

If a provider holds customer value, initiates payments, facilitates merchant settlement or operates a wallet, the baseline expectations should reflect the activity and the risk to the customer.

This does not mean every provider should face the same level of regulation. Banks already carry prudential and conduct obligations, and lower-risk providers should not face unnecessary burden.

But where different providers perform the same payment activity, customers should be able to expect comparable baseline protections.

It should align with the customer outcome. If the customer is using a service to pay, get paid, hold value, receive a payout or resolve a payment issue, the protections should be clear from that perspective, regardless of whether the provider behind the scenes is a bank, fintech, platform, remitter, wallet provider or offshore payment service provider.

2. Customer-money protection needs to be clearer

One of the most important issues is how customer money or stored value is protected.

Wallet balances, merchant payout balances, pooled trust arrangements, virtual accounts and other stored-value models can look similar to users. But the protections behind them may differ significantly.

Customers should not have to understand complex legal structures to know whether their money is segregated, what happens if a provider fails, whether the Depositor Compensation Scheme (DCS) applies, and how quickly funds can be returned.

Clear safeguarding rules and plain disclosure should be an early priority.

3. Payment facilitation also carries real risk

Payment facilitation is sometimes treated as lower risk because funds may only be held briefly. In practice, high-volume facilitation can create meaningful risks around settlement, reconciliation, outages, errors, fraud response and disputes.

The risk should be measured by what is being moved, for whom, at what scale, and with what operational dependencies.

A provider embedded in merchant settlement, platform payouts, payroll, remittance or other business-critical flows can create customer and market harm even if it is not large by balance sheet size alone.

A customer may only see one payment experience, but it actually relies on several connected parties, all sharing some responsibility for the outcome. A modern framework should clarify who is responsible before something goes wrong, not only after a complaint is made.

4. Scam and fraud prevention must be designed into the system

Faster and more varied payment flows can improve commerce, but they can also move harm faster.

Scam prevention should not sit to one side of payments reform. It should be designed into the future framework from the start.

That includes Confirmation of Payee, behavioural analytics, mule-account detection, shared intelligence, platform and telecommunications cooperation, customer education, dispute resolution and liability settings.

New Zealand has an opportunity to build trust and resilience into the payments system before new models reach scale.

5. Data transparency is now part of payment trust

Payments are becoming more data-rich. As account-to-account payments, open banking and automated payment experiences develop, users need to know more than the amount, timing and fees.

Customers need to understand what data is being shared, who it is being shared with, where it is stored, how it is protected, and how it may be used for fraud prevention, personalisation, reconciliation or dispute resolution.

A future payment services framework should be coherent with the Consumer and Product Data Act, while recognising that data-rich payment experiences will not be limited to one rail or one regulatory regime.

6. Reform should be proportionate and staged

New Zealand does not need to impose bank-like regulation on every payment provider.

The better approach is a legislated baseline for relevant payment services, with stronger oversight for higher-risk activities such as material stored value, custody, high-volume facilitation and services that other businesses rely on.

Practical early steps could include clearer disclosure, safeguarding expectations, DCS clarity, operational accountability, incident response and complaints expectations.

A licensing framework could then be developed with a realistic transition period, aligned with open banking, ESAS access changes and wider payments modernisation.

7. New Zealand should align with Australia where sensible

Many providers operate across both New Zealand and Australia, or rely on Australian partners. Where definitions, compliance expectations and provider categories differ unnecessarily, smaller providers can face duplicated cost and complexity.

Alignment does not mean copying Australia wholesale. New Zealand should preserve flexibility for local market conditions, inclusion needs and its own payments modernisation pathway.

But where the same activity and risk are involved, Australia should be an important reference point. This would support competition, trans-Tasman growth and future readiness for Pacific, ASEAN and global payment corridors.

A practical opportunity for New Zealand

The future of payments will not be one rail replacing another. It will be many rails operating in parallel.

That makes payment routing a governance issue.

Businesses will increasingly need to choose the right rail for the right payment flow, taking into account cost, speed, reversibility, data, fraud risk, settlement finality, customer understanding and operational resilience.

The goal should not simply be more payment methods for their own sake. It should be better payment routing: the right rail, for the right use- case, with the right protections and the right level of customer understanding.

Good regulation should help make those choices clearer. It should give providers a fair pathway to market, help banks and partners assess risk, and give customers confidence that baseline protections apply where comparable risks exist.

If New Zealand gets this right, clearer rules can support better customer outcomes, stronger provider confidence, more effective partnerships and greater investment in new payment services.

Trust is the foundation.

With it, innovation can move faster, investment can flow with more confidence, and New Zealand can build a payments system that is ready for the future.

Talk to us about the future of payments in New Zealand, emilie@mccallumco.net.