Lesson 9: Payment Services PDF

Lesson 9: Payment Services ELECTRONIC PAYMENT AND FINANCIAL SERVICES Electronic Payment and Financial Services (EPFS) ○ Bangko Sentral recognizes that EPFS contributes to economic growth by facilitating fund transfers for productive activities. ○ EPFS ai...

Lesson 9: Payment Services ELECTRONIC PAYMENT AND FINANCIAL SERVICES Electronic Payment and Financial Services (EPFS) ○ Bangko Sentral recognizes that EPFS contributes to economic growth by facilitating fund transfers for productive activities. ○ EPFS aims for a safe, efficient, reliable, affordable, and inclusive national payment system. ○ Products/services offered by BSFIs that allow customers to receive payments or initiate financial transactions through electronic devices (computers, mobile phones, ATMs, etc.). ○ Allow customers to electronically access information on their transaction accounts. ○ Allow customers to move or receive funds from one account to another, or avail of credit, investment, trust, or other banking products and/or services (e.g., online or mobile loan application, electronic placement of funds in certain investment outlets, etc.). ○ Electronic Payment (EFT) → Synonymous to electronic fund transfer (EFT). → Refers to transfers of funds between two transaction accounts in the same or different BSFIs. → Initiated and received using electronic devices and channels to transmit payment instructions. → This excludes domestic remittance transaction under existing Bangko Sentral regulations. ○ Transaction Account → An account (e.g., deposit account, e-money, electronic wallet, etc.) held or maintained with a BSFI, which could be a bank or a non-bank. ○ Classification of EPFS → Basic EPFS: – These are limited to services allowing only receipt of funds or access to information (e.g., account balance, statement of account, etc.). → Advance EPFS – In addition to basic services, enables fund transfers and other financial transactions. E-money ○ Refers to an electronically-stored monetary value that is: → Maintained in a non-interest-bearing non-deposit transaction account. → Denominated in or pegged to Philippine Peso or other foreign currencies. → Pre-funded by customers to enable payment transactions. → Accepted as a means of payment by the issuer and by other persons or entities including merchants/sellers. → Issued against receipt of funds of an amount equal to the monetary value issued. → Represented by a claim on its issuer. → Withdrawable in cash or cash equivalent or transferable to other accounts/instruments that are withdrawable in cash. ○ Electronic Instruments or Devices → Refer to cash cards, prepaid cards, stored value cards or any digital wallet accessible via mobile phones or other access device, and other similar products within the scope of electronic payments and financial services. ○ Classifications of EMIs 1. EMI-Banks 2. EMI-Non-Bank Financial Institutions (EMI-NBFI): Includes cooperatives. 3. Non-bank institutions registered as monetary transfer agents (EMI-Others). ○ Banks may offer E-money services subject to prior approval of the Bangko Sentral under Electronic Payment and Financial Services (EPFS) license and compliance with the prudential criteria. ○ The following guidelines shall govern the issuance and operations of E-money: a. Minimum Systems and Controls First Semester Page 1 a. Minimum Systems and Controls BSFIs shall ensure that the following, are in place: – Sound and prudent management, administrative and accounting procedures and adequate internal control mechanisms. – Properly-designed computer systems which are thoroughly and independently tested prior to implementation. – Appropriate security policies and measures intended to safeguard the integrity, authenticity, and confidentiality of data and operating processes. – Robust selection criteria and due diligence process in accrediting E-money agents and merchant/business partners and criteria for periodic performance review. – Fraud risk management system that is commensurate to the risks associated with particular EMI classification or specific EMI activities. – Adequate business continuity and disaster recovery plan. – Effective audit function to provide periodic review of the security control environment and critical systems. b. E-money shall only be issued and redeemed at face value. – It shall not be purchased at a discount wherein the E-money credited to the customer's account balance is higher than the amount of fiat money used to purchase it. – The issuance and operations of E-money denominated in foreign currency shall be subject to existing foreign exchange rules and regulations. – E-money is not considered a deposit. – lt shall not earn interest and other similar incentives convertible to cash that may be construed as earning of interest. – BSFIs may offer promotional incentives that are not based on the outstanding balance of the e-wallet to encourage greater usage and attract new users. c. Consumer Protection – BSFIs are required to strictly adhere to Bangko Sentral regulations on Financial Consumer protection. – BSFIs shall adhere to the expectations provided under this regulation covering the following core principles: a. Disclosure and transparency of E-money transactions. b. Protection of client information. c. Fair treatment of E-money customers. d. Effective recourse in place for handling complaints and redress mechanisms. e. Protection of E-money Consumer Assets against Fraud and Misuse. d. Minimum Disclosure Requirements – BSFIs shall provide clear terms and conditions on the use of E-money. – Should be made available through various channels, including: a. BSFI's website b. Brochures c. Registration form (user's and merchant's copy). – BSFIs must obtain acknowledgement from their users and merchants that they have read and understood the terms and conditions prior to their availment of Emoney services. – The terms and conditions shall include the following information, among others: a. lssuer of the E-money who is ultimately responsible to the E-money holders. b. Type of transactions that can be made using the E-money. c. All applicable fees and charges. d. FX risks and basis of applicable exchange rates for FX transactions using the application for multi-currency E-money wallets. e. Availability of user's transaction history and/or statement.of accounts. f. Procedures for reporting lost or stolen E-money and lodging a complaint, including the manner on how the losses and liabilities from security breaches, First Semester Page 2  including the manner on how the losses and liabilities from security breaches, system failure, or human error will be settled between the BSFI and its customers. g. Refund policy, including refund conditions, procedures, turnaround time and cost. h. Rights and responsibilities of users and merchants. i. User's and merchant's liability for damaged, lost, malfunctioned, or compromised e-wallet instrument or value, and fraudulent transaction. j. Customer service contact number(s) as well as the details of the Bangko Sentral Consumer Assistance Mechanism. e. Interoperability of Systems – BSFIs shall make its E-money products/services/platforms with fund transfer functionality interoperable by participating in an Automated Clearing House pursuant to the guidelines set under the National Retail Payment System (NRPS) Framework f. Aggregate Limits – BSFIs shall adopt a client categorization process in order to implement pre-defined limits and thresholds based on institutional risk assessment and customer due diligence process. – BSFIs participating in payment systems (PS) shall adopt limits and thresholds consistent with those applied by the PS. – In case a BSFI issues several E-money instruments to a person (E-money holder), the total transactions and/or amount loaded in all the E-money instruments shall be aggregated in determining compliance with the EMI's established limit. g. Liquidity Requirement – BSFIs shall have sufficient liquid assets to meet E-money redemptions at all times and to protect the interest of the E-money holders. – BSFIs shall maintain liquid assets at least equal to the amount of outstanding E- money issued for each currency in which the E-money obligations are denominated. ACRONYMS ATM: Automated Teller Machine Electronic Payment and Financial Services (EPFS) Electronic Payment (EFT) E-Money Issuers (EMIs) EMI-Non-Bank Financial Institutions (EMI-NBFI) National Retail Payment System (NRPS) payment systems (PS) First Semester Page 3