BSP bares new framework for merchant payment scheme

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has finalized a regulatory framework for merchant payment acceptance activities (MPAA), ramping up its digitalization and financial inclusion initiatives.

In a circular, the BSP said enabling merchants to accept different forms of payments is crucial in facilitating the smooth flow of funds and contributing to the wider adoption of digital payments in the country.

“For digital payments to thrive, minimum standards and good practices must be established to safeguard the funds received from customers of merchants and protect the rights and interests of end-users that deal with operators of payment systems (OPS) that engage in MPAA,” it said.

The framework also ensures that OPS that engage in MPAA adopt commensurate governance structures and appropriate measures to effectively manage risks attendant to their business model.

This includes risks related to settlement, operations, information technology, anti-money laundering and countering terrorism and proliferation financing (AML/CTPF) as well as end-user protection.

Merchant payment acceptance activities are services provided to a merchant to receive payment for sale of goods and services.

“In general, services include merchant acquisition; providing the means to accept various payment instruments and collect, secure, transmit and process payment information; and providing support services related to the payment,” the BSP said.

Under the new rules, entities need to secure necessary prior approval from the regulator to be able to conduct merchant payment acceptance activities.

“Regardless of the status of its  compliance with the registration requirement under Section 502 of this Manual, an OPS that intends to engage in merchant acquisition shall secure a Merchant Acquisition License with the appropriate supervising department of the Bangko Sentral,” it said.

Banks, e-money issuers and other non-banks that intend to engage in merchant acquisition do not need to apply for a separate license from the BSP. However, it still needs to notify the supervising department of the central bank.

The BSP also set the minimum capital requirement for large-scale merchant acquirers or those with monthly transactions of P100 million and above at P10 million, and for small scale merchant acquirers with less than P100 million worth of transactions at P5 million.

Merchant acquirers are required to ensure timely and complete funds settlements of no longer than two business days from the day the funds are received for transfer to a merchant.

They will also adopt a pricing mechanism whereby merchant fees may be charged to merchants availing of merchant payment acceptance activities.

“Such pricing mechanisms shall be reasonable, transparent, market-based and proportional to the cost of the services offered in order to sustain the business operations of the parties involved,” the BSP said.

Institutions are also expected to comply with AML/CTPF requirements as merchant acquirers and payment facilitators will be considered as covered persons under the Anti-Money Laundering Act and other related laws.