The Council of the Central Bank of Chile (“BCCh” for its initials in Spanish) agreed to publish in consultation a series of modifications to its regulation on the operation of payment cards and issuance of cards with provision of funds or prepaid cards, contained in Chapters III.J.1 and III.J.2 of the Compendium of Financial Regulations of the Central Bank (hereinafter, “CNF” for its initials in Spanish).
This proposal seeks to update the current regulation, adapting to new business models and prudential standards in its regulation.
In particular, we can highlight:
(i) Incorporation of PSP Sub-Operator or Sub-Acquirer
Currently, the regulations establish that Payment Processing Service Providers (“PSP” for its initials in Spanish) that provide payment card Issuers or Operators, services consisting of the settlement and/or payment of sums of money owed to affiliated entities for the use of said cards; they must not comply with the requirements established in the CNF, to the extent that the settlement to affiliated businesses that they carry out remains below the threshold of 1% of market transactions. If this threshold is exceeded, they must register as a Payment Card Operator and comply with the requirements set forth in the regulations.
With the new proposal, the BCCh includes in the regulation an intermediate stage between the PSPs and the Operators, specifically applicable to the PSPs that settle payments to affiliated merchants, who are now called “PSP-Sub Operator” (internationally recognized as “sub-acquirers”). For all legal and regulatory purposes, the PSP-Sub Operator will be considered as Payment Card Operators, but with more limited prudential requirements.
Based on this, it is established that the PSPs that carry out settlements between 0.5 and 1% of the market transactions to affiliated businesses must be established as Operators, subject to a capital requirement of 1,000 UF, being subject to the supervision of the CMF. In addition, it is established that the PSP-Sub-Operator may only provide sub-operation or sub-acquisition services, not being able to be contractually linked with another PSP Sub-Operator, and that they must submit to the other regulations that the CNF establishes for them.
(ii) New regulation for the development of cross-border acquisition activities.
With the availability of new technologies, it is possible that the affiliation of businesses or entities with domicile or residence abroad is carried out by Operators or PSP Sub-Operators incorporated in Chile. This modality, called “cross-border acquisition”, allows the corresponding cardholders to make payments abroad through transactions carried out with Payment Cards issued in Chile.
Given this situation, the BCCh considered essential to define the regulatory framework applicable to cross-border acquisition activities, to adequately facilitate this activity and allow its growth within a framework of prudential safeguards that allow limiting risks to the stability of the national payment system. Thus, a new Title VII of Chapter III.J.2 of the CNF is proposed, which regulates the applicable requirements.
Among other aspects, it is established that cross-border acquisition activities may be carried out by Operators and Sub-Operator PSPs that are established with a minimum capital of 2,000 UF and must be registered in the Registry of Card Operators in charge of the CMF. Additionally, it will be required to cover the exchange risk generated in these transactions, through an additional capital charge indicated in the regulation.
(iii) Fintec Law: Regulation for closed or semi-closed payment models
Cards and electronic prepaid means have evolved into models where an entity collects funds from the public, but not necessarily so that they can be used to make payments in businesses adhering to the payment system; but to be transferred to make payments between people or businesses that have accounts with the same issuer. Examples of these types of schemes are WeChat and AliPay in China.
In Chile, the possibility of developing this type of business was explicitly enabled in the recently approved Fintec Law (Law No. 21,521).
In this context, the BCCh proposes to establish clarifications in the way of constituting the Liquidity Reserve required of the issuers of these means of payment, so that payments made within the network are excluded from said reserve. Likewise, issuers of non-banking prepaid means will be required to implement procedures so that holders can make payments or transfers to other accounts, preventing these new forms of operation from affecting the integrity of the low-value payment system.
Additionally, the regulatory proposal incorporates other safeguards that are detailed in the Central Bank agreement (Banco Central de Chile adapta y actualiza su regulación sobre emisión y operación de medios de pago a nuevos modelos de negocios – Banco Central de Chile (bcentral.cl)), along with transition periods to adjust to the new requirements.
This regulation in public consultation will remain open for two months, until September 22nd, 2023. Comments must be sent to consultaTARJETAS@bcentral.cl
