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The central bank of the Philippines has mandated that firms intending to carry out merchant acquiring activities must obtain a specific licence from the regulator.
Bangko Sentral ng Pilipinas (BSP) has issued Circular No. 1198, which establishes a new Regulatory Framework for Merchant Payment Acceptance Activities (MPAA).
Among its provisions, the circular states that firms must obtain a Merchant Acquisition Licence (MAL) prior to engaging in merchant acquiring.
This is a new type of authorisation issued by the Payments Supervision and Licensing Department of the BSP.
The requirement is applicable to firms that already hold an Operator of Payment Systems (OPS) Licence and to firms that do not hold an OPS licence.
If a firm does not already hold an OPS licence, but applies for and successfully obtains a Merchant Acquisition Licence, it does not need to register as an OPS.
As noted by the BSP, a firm that is granted a Merchant Acquisition Licence will be considered compliant with regard to the obligations of OPS licence-holders.
Lito Villanueva, founder and chair of the Philippines FinTech Alliance, said his association supports the introduction of a specific licence for merchant acquirers.
The rules outlined in the circular will “further promote consumer protection and security”, he hold Vixio.
Pre-existing licence structures
Under the 2018 National Payment Systems Act, an OPS is defined as any entity that provides clearing or settlement services in a payment system, or who designs, controls or maintains the operational framework for a payment system.
This definition was further developed in a subsequent BSP regulation, Circular No. 1049, which was issued in 2019.
Under Circular No. 1049, an OSP is defined as any entity that:
(a) Maintains a platform that enables payments or fund transfers, regardless of whether the sending or receiving accounts are maintained within the same or different institutions.
(b) Operates a system or network that enables payments or fund transfers to be made through the use of payment instruments.
(c) Provides a system that processes payments on behalf of any person or government agency.
(d) Performs other such similar activities, as determined by the Monetary Board of the BSP.
Circular No. 1049 also introduced the rules and regulations for the licensing of OSPs.
These rules form part of the BSP’s Manual of Regulations for Payments Systems (MORPS), the current edition of which is updated to December 2023.
Standardising merchant payment acceptance activities (MPAA)
The BSP’s latest circular outlines other standards and best practices for firms engaging in or intending to engage in merchant payment acceptance activities (MPAA).
The standards relate to areas such as the safeguarding of customer funds and the protection of merchants’ rights in interactions with acquirers and payments firms.
Information technology (IT) and anti-money laundering (AML) standards expected of payments firms are also included.
“The framework aims to ensure that payment system operators engaged in MPAA adopt governance structures and measures to effectively manage risks attendant to their business model,” said the BSP.
The BSP defines MPAA as any service provided to a merchant to receive payments in exchange for goods and services.
Designated activities include merchant acquisition, the provision of any means to accept any payment instrument, or to collect, secure, transmit or process payment information.
The BSP defines merchant acquisition as the accepting and processing of payments on behalf of a merchant under an agreement, resulting in a transfer of funds to the merchant.
The Payments Supervision and Licensing Department of the BSP will be responsible for processing the applications for the Merchant Acquisition Licence and other supervision or examination activities.
