PH central bank issues framework for digital payment system operators

Payment system operators are required to obtain a license from the BSP.

The Philippine central bank has issued a framework to safeguard customers’ funds and protect merchants’ rights when dealing with digital payment system operators.

Circular No. 1198 or the regulatory framework for merchant payment acceptance activities (MPAA) aims to establish standards and best practices with the goal of smoothening the flow of financial transactions, the Bangko Sentral ng Pilipinas (BSP) said in a statement published on 13 August. 

Payment system operators engaged or intending to engage in merchant acquisition must obtain a license from the BSP, with the Payments Supervision and Licensing Department responsible for processing the applications.

Payment system operators engaged in, or intending to engage in MPAA other than merchant acquisition are also required to register with the BSP.

MPAA refers to services provided to a merchant to receive payment in exchange for goods and services, whilst merchant acquisition is accepting and processing payment transactions on behalf of a merchant under an agreement, resulting in a transfer of funds, according to the BSP.
 
The move comes amidst the rise of merchant payments in the Philippines. In 2023, merchant payments accounted for 64.9% of digital transactions, according to the central bank.

The framework aims to ensure that payment system operators engaged in MPAA adopt governance structures and measures to effectively manage risks, the BSP said.
 
Risks include those related to settlement, operations, information technology, anti-money laundering, counter-terrorism financing, counter-proliferation financing of weapons of mass destruction, and end-user protection.

The circular also seeks to enhance end user confidence in digital payments to smoothen flows for financial transactions.

Non-compliance with the requirements shall be subject to the BSP’s enforcement actions under the National Payment Systems Act and the New Central Bank Act.

Recently, the BSP has announced the lifting of a moratorium against granting new digital bank licenses.