Chilean Regulator Expands Permissible Services Of Non-Bank Card Acquirers

October 17, 2023
Chile’s Financial Market Commission has issued a new rule that allows non-bank card acquirers to carry out complementary activities to their main business line.

Chile’s Financial Market Commission (CMF) has issued a new rule that allows non-bank card acquirers to carry out complementary activities to their main business line.

In addition to card acquiring, non-bank acquirers are now allowed to offer sales reporting and reconciliation services, such as cash flow balancing. 

As per the rule, they can also issue e-invoices or e-receipts for transactions conducted via any means of payment, and collect and process payments on behalf of third parties.

The regulator said the new rule aims to level the playing field between bank and non-bank card acquirers in relation to their ability to offer complementary services.

The rule also introduces improvements to both merchant and consumer services and “potentially contributes” to expanding the card acceptance network.

Chile’s booming card payment ecosystem

As reported by Vixio, card acquiring in Chile was historically dominated by a single bank-owned company called Transbank.

Starting in the mid-2000s, policymakers noticed that the lack of competition had hurt businesses and consumers, prompting them to break up Transbank’s monopoly, enabling the entry of new market players and establishing a four-party card payment ecosystem.

Legislative and regulatory changes in 2016 and 2017 created a set of new categories for non-bank payment market players, allowing them to start offering card-issuing, card-acquiring, sub-acquiring and payment processing services.

As a result of the new regulatory framework, nine new non-bank card issuers entered the market, in addition to three banks and a cooperative facilitating prepaid card issuance, the CMF said.

On the acquiring side, there are now seven card acquirers operating in the Chilean market, including local payment giant Mercado Pago, Transbank, Banco Estado’s Red Global and Santander’s GetNet.

Meanwhile, the number of payment service providers (PSPs) offering sub-acquiring services has surpassed 20.

The entry of these new market players has contributed to a significant increase in the card payment acceptance network, which has grown from 180,000 merchants to 1.23m businesses that accept cards between 2018 and 2022, according to the CMF.

The financial regulator now intends to increase this growth by allowing non-bank card acquirers to provide new services complementary to their core line of business.

Complementary services could be a ‘differentiating factor’

In a supplementary note, the CMF explained that this could further help the development of the industry by allowing the use of “synergies” derived from card-acquiring services.

It added that these complementary activities “could potentially be a differentiating factor for card acquirers which encourages competition beyond the fees charged for a transaction”.

The regulator also noted that current regulations exempt smaller acquirers, which are those that process less than $105m in payments a month, also known as sub-acquirers, from most of the requirements that apply to PSPs and card acquirers.

For instance, they have no restrictions on whether they provide complementary services as long as they stay below that threshold.

Once they cross it, they must register with the CMF as a regular acquirer at which point they get automatically restricted from offering complementary services that they had already been providing in their capacity as a PSP.

The new rule would fix that convoluted situation by allowing smaller acquirers to continue to offer a wider range of services as they grow.

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