Consultation opens on New Zealand's payment services regulation

The Ministry of Business, Innovation and Employment (MBIE) has released a discussion document seeking feedback on whether New Zealand's rules for payment services are clear and fit for purpose. Submissions close at 5pm on Friday, 3 July 2026.

What is the consultation about?

The consultation is about the rules that apply to payment service providers – both banks and non-bank providers – when they offer payment services to people and businesses in New Zealand. The document focuses on two broad categories of front-end services:

•  Payment facilitation services – services that help a payment happen without holding customer money for long periods or at all (for example, merchant acquiring services, online payment gateways, money transfer services and payment initiation services enabled by open banking); and

•  Stored value services – services that hold a balance for a customer to use later (for example, digital wallet apps).

The consultation also touches on payment services that use digital tokens, including stablecoins, where specific questions and risks arise.

Notably, the consultation is not about back-end clearing and settlement infrastructure, surcharging rules, ordinary bank transaction accounts, closed-loop gift or transit cards, or digital tokens used primarily as investments.

Why is a review needed?

Unlike the United Kingdom, the European Union, Australia and Singapore – each of which has a dedicated regulatory framework for payment service providers – New Zealand does not have a single, purpose-built set of rules for payment services.

Instead, different requirements apply depending on how a service is structured, what the provider does, and whether it is a bank or a non-bank. This can make it hard for providers and users to work out which rules apply, what protections users have and whether similar services face similar requirements.

For many non-bank providers, the most common legal requirements are registration on the Financial Service Providers Register, membership of an approved dispute resolution scheme, compliance with fair dealing obligations under the Financial Markets Conduct Act 2013 and the Fair Trading Act 1986, and AML/CFT compliance (where applicable). Banks are also subject to broader prudential and conduct regulation, but even they operate within a framework that was not specifically designed for modern payment services.

The discussion document identifies several areas where the current settings may not be working well:

Gaps in consumer and business protection

There is currently no general safeguarding or "client money" regime requiring non-bank payment service providers to segregate or protect customer money or stored balances. There are also no consistent disclosure requirements across the sector, and no single set of conduct expectations backed by ongoing supervision and enforcement by a regulator.

While a common approach for non-bank providers is to hold customer money on trust at a bank, the protections that flow from that arrangement can vary depending on the terms of the trust and the terms of the customer contract.

Rules designed for other purposes

The rules that currently apply to payment services were largely designed for traditional deposit-taking, lending or investment products, not payment services. Applying those rules to payment services can create requirements that do not match how the service works or the risks it creates and may impose costs or complexity that are poorly targeted.

Barriers to entry, competition and scale

The discussion document notes that the current rules and commercial arrangements may make it harder than necessary for some payment services to start up, compete or grow – including because clearer baseline rules could make it easier for providers to demonstrate credibility to partners and investors.

Digital token-based services

Services that use digital tokens (such as stablecoins or tokenised deposits) for payments raise specific issues around custody and control, reserve assets and cash-out arrangements, and the risk that similar-looking products carry materially different risks for users. AML/CFT obligations covering virtual asset service providers focus on financial crime prevention and do not provide consumer protection around safeguarding or fair treatment.

Cross-border and trans-Tasman issues

Some payment service providers operate across New Zealand and Australia or rely on Australian partners, investors or group structures. Where regulatory approaches differ unnecessarily, businesses can face duplicated compliance costs and barriers to scaling across borders.

What is MBIE asking?

This is an exploratory consultation – the discussion document does not propose a preferred solution or commit to legislative reform. MBIE is seeking feedback from a wide range of stakeholders including banks, non-bank providers, businesses, consumers, industry bodies and academics.

Looking across the questions posed by MBIE, some key themes appear:

•  How well the current rules work in practice, including whether they are clear and fit for purpose.

•  Barriers that have slowed new payment services from launching or scaling, and what would make the biggest difference to address first.

•  Whether consumer and business protections are adequate, consistent and well-matched to risk.

•  The future of payment services if nothing changes. What will happen over the next 2–3 years (and longer term) if rules stay as they are?

•  Objectives and approaches for any future reform, including how rules should apply (for example, based on activity or entity type) and whether a risk- or size-based approach to proportionality makes sense.

•  Cross-border and trans-Tasman alignment, including how any future rules should support cross-border payments and fit with international frameworks, including Australia’s.

On the question of approach to the rules for payment services, the discussion document sets out six options:

1.   Maintaining the status quo;

2.   Clarifying existing rules through guidance or targeted amendments to existing laws;

3.   Setting baseline statutory rules applying to all payment service activities (for example, rules about safeguarding customer money or stored balances);

4.   Introducing a licensing and oversight framework for some payment service activities, potentially with tiered requirements based on risk or size;

5.   Combining these approaches; or

6.   Using industry standards or co-regulatory models.

The discussion document doesn’t propose a preferred approach.

Points of interest

Timing and context

As we have written about recently, this consultation sits alongside significant activity in the New Zealand payments space. The question of how any new payment services rules fit coherently and sequence with other ongoing reforms (like regulated open banking, changes to ESAS access arrangements and the Reserve Bank’s payments modernisation programme) is an important one – the consultation specifically asks providers whether there are "do this first" or "don't do this at the same time" issues to watch.

Activity based regulation vs entity-based regulation

One of the key design questions raised is whether future rules should apply based on what a provider does rather than what type of organisation it is. This distinction is sound but not without its own complexity, particularly where a provider offers both regulated and unregulated activities on the same platform, or where the same service could be characterised in more than one way.

Proportionality and thresholds

MBIE asks how any future rules should scale with risk and size. The discussion document floats factors such as the value of customer balances held, transaction volumes, and whether customer money is held at all.

These thresholds will matter considerably for smaller or emerging providers. The design of any tiering mechanism will be critical to ensuring the framework supports competition and innovation.

Trans-Tasman alignment

Australia's payment services reforms are at an advanced stage, and will bring stored-value facilities, payment stablecoins, payment instruments, payment facilitation services, and cross-border transfer services under a licensing framework administered by ASIC, with APRA oversight applying to major stored-value facilities.

MBIE raises the question of whether closer alignment with Australia would reduce compliance friction for providers operating across both markets. Given that many New Zealand payment service providers operate in (or rely on partners from) Australia, this is a practical question as much as a policy one. However, New Zealand will need to consider whether the Australian model is a good fit for a smaller market, and where divergence might be justified.

Digital tokens and the regulatory perimeter

The inclusion of digital token-based payment services (stablecoins, tokenised deposits and services that use digital tokens to move value) is important given the proliferation of these products, but raises design questions that many jurisdictions are still working through. The discussion document is careful to note that it is interested only in services that use digital tokens to make or receive payments or hold tokens for later payments – not digital tokens used mainly for investment or speculative trading. That boundary, between payment stablecoins and investment assets, is one that may be difficult to draw and maintain in practice as product designs evolve (the treatment of “yield” being a good example).

What happens next?

After consultation closes on 3 July 2026, MBIE will use the feedback to advise Ministers on whether there is a case to change the rules for payment services and, if so, what form it should take.

If Ministers decide further work is needed, it would likely be done in stages: developing more detailed advice on objectives and options based on submissions, then (if needed) consulting again on more detailed proposals, including how any approach would scale with risk and size and what transition arrangements might be needed.

MBIE says that it is working closely with the Reserve Bank, the Financial Markets Authority, the Commerce Commission and the Treasury to ensure any future reform is coordinated across the wider payments landscape.

On its website, MBIE says it will host a webinar to provide an overview of the discussion document, with an opportunity for stakeholders to ask questions. Further details, including timing, are yet to be published.

The issues identified by MBIE reflect many of those raised in recent industry discussions, and it is encouraging to see the Government responding to and prioritising these concerns. A well-designed regulatory regime for payment services should encourage innovation by both local and international fintech players, and provide confidence to both consumers and providers of payment services.

If you would like to discuss the consultation or get assistance preparing a submission, please get in touch with our team.