Law on Payment Systems and Services
At the end of August, the Law of the Republic of Belarus dated April 19, 2022 No. 164-3 “On Payment Systems and Payment Services” (the “Law”) came into force. The Law will fully work after the entry into force of by-laws, which shall be adopted by the National Bank and the Government shortly.
What’s New?
The Law comprehensively regulates the issues of payment services and payment activities, establishing uniform requirements for market participants.
For instance, in addition to traditional payment market players – banks and non-bank financial institutions – the Law legalizes new participants – payment aggregators, payment couriers and other payment service providers.
The Law distinguishes the following types of payment services:
- services of payment system operator for the organization of the payment system (organizing payment system, establishing the rules of payment system);
- settlement services (opening and closing of accounts, operations on accounts);
- payment initiation (payment processing and transfer to settlement center, aggregator, etc.);
- merchant acquiring services (acceptance of payments for the benefit of third parties);
- issuance (creation) or distribution of payment instruments (issue of bank payment cards, prepaid financial products and other payment instruments);
- payment services for operations with electronic money (issuance, distribution, exchange and redemption of electronic money);
- clearing services (process of transferring, collecting, reconciling and calculating money claims);
- processing services (collection and processing of information and its transfer for settlements);
- Informational payment services (providing information for making a payment, account status, etc.).
However, some of the above listed services (for example, settlement services, issuance of payment banking cards) will still be able to be provided only by financial institutions with a banking license.
Payment services are provided by payment service providers that shall meet the established requirements and be included in the Registry of payment service providers and types of payment services they provide. The Registry will be formed and maintained by the National Bank of Belarus.
Among the requirements for payment service providers: size of the share capital, financial standards, safe operation standards, qualification requirements for the head and beneficial owners, information security, compliance of business processes with AML legislation, organization of internal control and management of payment risks , disclosure requirements and etc.
The payment service provider is entitled to perform several types of activities. Depending on the type and combinations of payment services, the requirements for payment service providers will differ, levels of the requirements will be established by the National Bank additionally.
The Law establishes that local companies that previously provided payment services must be included in the Registry no later than November 26, 2022.
Foreign companies that operate as a payment service provider must be included in the Registry within 12 months from the date the Law enters into force, i.e. no later than August 26, 2023.
The Law also defines the concept of technological services and outsourcing of technological services, which include implementation of activities in the field of information technology and other types of services that are critical for the payment system (payment market), but are not payment services in essence.
The Law introduces a new payment instrument as a prepaid financial product. This will allow merchants, for example, to give out cash to consumers in exchange for points accumulated through loyalty programs card.
Among other amendments, the appearance of a payment software application, which should allow the user to significantly simplify the payment, regardless of the bank and payment system.
The possibilities for issuing electronic money by companies are also expanding.
What’s Interesting in the Law?
The Law creates a legal basis for new types of activities, many of which have already been in demand in practice.
For instance, the Law directly permits the activity of accepting payments in favor of third parties (merchant acquiring payment transactions), which previously could be carried out mainly by banks and non-bank financial institutions.
The requirement to obtain a banking license largely was a brake on development of marketplace and fintech industries which have proven itself worth in the globe and Belarus. Now such opportunities have appeared for so-called payment aggregators, which can be both local and foreign companies, subject to a number of conditions and inclusion into the Registry of the National Bank.
It seems that this should have a positive impact on the financial and payment services market, as it creates new opportunities for various market players and generates competition, which should ultimately reduce the cost and improve quality of services for end users.
If you have additional questions or need advice in the field of Banking and Finance, please feel free to contact us.
Author: Nikolay Artemyev
