BSP to regulate e-money service providers
abs-cbnNEWS.com | 09/23/2008 7:38 PM
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The central bank will soon formalize its regulatory oversight over electronic money service providers, including Globe Telecoms and Smart Communications subsidiaries, which have expanded into the business of "taking public money."
The Bangko Sentral ng Pilipinas (BSP) said it was now circulating a proposed circular that would formalize the framework for e-money operations and the licensing of operators.
"Right now we have what can be described at best as an ad hoc framework," said BSP deputy governor Nestor Espenilla. "We want to put everything down formally."
Espenilla said the new policy framework would cover consumer protection, regulatory principles and prudential measures that e-money provides would be required to comply with.
Financial transactions processed electronically generally refer to convenient and cheaper transaction channels that could be accessed without visiting a conventional brick and mortar institution. Traditional electronic channels include automated teller machines (ATMs), phone and internet banking.
While these are coursed through the banking system, which is already regulated by the BSP, other channels, like mobile banking, are not.
Mobile banking, which Smart Communications started in 2003 with "Smart Money" and Globe Telecom followed with "G-Cash" in 2004.
The Smart Money technology allows users to make purchases, pay and receive domestic payments and to receive remittances by loading or transferring money from a bank account into a mobile phone account or reloading a prepaid card electronically through the mobile phone. The cash can be withdrawn from the phone account at either an ATM or one of the many SMART encashment centers, which include retail stores.
The G-cash is a similar technology, which provides the same services but does not use a debit card and instead just uses Cash In and Cash Out Center/ Outlets via the mobile phone. Consumers could store limited amounts of money on their cellphones to buy things at stores that participate in the network
"So when you buy e-money card, the person selling that in effect holds public money," Espenilla said.
Espenilla said that since e-money card issuers were, in effect, taking public money, their operations are vested with public interests. "They are holders of public money and that puts a dimension that would require regulation," he said.
Espenilla said the ad hoc policy framework was enough in the past because there were only a few operators providing the service.
"Now the number is growing so we need to provide this regulatory framework to anticipate as much as possible the potential problem areas and how they could be prevented," he said.
BSP's approach would be to provide a separate license to entities engaged in e-money operations. These licensed operators would then be required to comply with the criteria to be set by the central bank.
