Navigating risks: BSP unveils regulations for merchant payment activities

The Bangko Sentral ng Pilipinas (BSP) has released proposed regulations outlining the conduct of merchant payment acceptance activities, aiming to ensure that both banks and non-banks implement appropriate measures in line with these operations.

The draft regulation encompasses various aspects of merchant payments, including risk management related to settlement, operations, and data protection. Additionally, the rules address critical areas such as information technology (IT) and cybersecurity, anti-money laundering and countering terrorist and proliferation financing (AML/CTPF), and end-user protection.

The proposed framework, as outlined in the draft circular, aims to guarantee that entities facilitating merchant payment acceptance adopt suitable governance structures and effective risk management measures aligned with their business models.

Merchant payment acceptance activities, as defined by the BSP, pertain to services enabling a merchant to accept different payment instruments by collecting and processing related transaction information.

Merchants encompass physical or electronic retailers, service providers, billers, and/or businesses accepting payments for goods and/or services.

The proposed rules cover various aspects, including licensing, capital requirements, governance, AML/CTPF compliance, merchant onboarding/monitoring/dispute resolution, end-user protection, IT risk management, pricing mechanisms, outsourcing, reportorial requirements, and enforcement actions.

Regarding capital requirements, the draft circular specifies that the necessary capital for merchant acquirers will be size-dependent. Large-scale merchant acquirers, with 12-month transactions of P100 million and above, will require P20 million in capital, while smaller entities with transactions exceeding P5 million but less than P100 million will need P5 million.

License fees for the merchant acquirer category will range from P25,000 to P60,000. Entities holding a merchant acquisition license will be deemed compliant with the registration requirements as an operator of a payment system (OPS).

The BSP clarified that the proposed policy will encompass BSP-supervised financial institutions, such as banks and electronic money issuers nonbank financial institutions, including cooperatives, as well as non-financial institutions engaged in or intending to conduct merchant payment acceptance activities in the Philippines.

In its policy statement, the BSP emphasized that enabling merchants to accept various forms of payments is crucial for facilitating the smooth flow of funds in the economy and contributing to the wider adoption of digital payments in the country.